Andean Precious Metals Corp.

Good morning, everyone, and welcome to the Andean Precious Metals fourth quarter and year-end 2024 results conference call. As a reminder, all participants are in a listen-only mode. The conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star and then one on your telephone keypad. Should you need assistance during the conference call, you may single an operator by pressing star and then zero. At this time, I'd like to turn the conference call over to Amanda Malo, Director, Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Before we get started, I would like to point out that during today's call, we may make forward-looking statements as defined under the Canadian Securities Law. I ask that you view our slide presentation for cautionary language regarding forward-looking statements and the risk factors pertaining to these statements. Our press release, MD&A, and financial statements are available on both CDAR Plus and on our corporate website, andianpm.com. With us presenting on today's webcast is Alberto Morales, Andian's Executive Chairman and CEO, and Juan Carlos Sandoval, our CFO. In the room with me, I have our new president, Johan Bouchard, Dom Kizak, our Vice President of Finance and Corporate Controllers, And Alex Pasquale, our director of FP&A, who will be available during the Q&A period. Following management's formal remarks, we will open the call to questions. And with that, I'll turn it over to Alberto.

Thank you, Amanda, and welcome, everyone. 2024 was a transformative year for Handy and Precious Metals. It marked our first full year with Golden Queen in our operating portfolio, and despite operating at close to the lower end of our production range, we achieved record revenues of $254 million and a record adjusted EBITDA of $62.9 million. Despite our capital expenditures in 2024 of $32 million, the company generated record free cash flow of $35 million. We delivered consolidated production of 106,287 gold equivalent ounces, which was just below the lower end of our gold and silver guidance, mainly due to a temporary suspension of the crushing and stacking activities at Gold and Queen, and lower production than expected from our tailings recovery program at San Bartolome. We'll discuss the production in greater details later in this call. as well as our 2025 guidance. A key milestone was our successful uplisting to the Toronto Stock Exchange. This achievement marks an important step in elevating NDN's profile within the investment community, enhancing our access to capital markets, and strengthening our position among leading mining companies. I'd like also to welcome our new president, Johann Bouchard, to our executive team, Johan brings with him a significant operational and strategic experience, reinforcing our commitments towards improving our technical and operational excellence. Lastly, during the fourth quarter of 2024, no lost time injuries have been reported at Golden Queen or San Bartolome. As of the end of the fourth quarter of 2024, San Bartolome reached 118 days without lost time injuries. And Golden Queen reached 561 days without lost time injuries. We look forward to sharing further details on these results and answering your questions. With that, I will hand this over to Juan Carlos, who will walk you through our financials in greater detail.

Thank you, Alberto. Good morning, everyone. As we turn to our financial performance this year, I'd like to emphasize the strength of our financial position and continued focus on value generation and growth. On a consolidated basis, MDN had record revenues of $254 million with cross-operating income of $68.6 million and net income of $19.2 million. and 12 cents per share and adjusted EBITDA of 62.9 million and 41 cents per share on a diluted basis. 2024 was a strong year for cash flow generation, which can be seen with our strong balance sheet, which reported 62.4 million in cash and cash equivalent and liquid assets of 81.6 million as of December 2024. We had a very strong period of free cash flow generation, despite significant capex, particularly at Golden Queen. We had $31.6 million in capital expenditures in 2024, which included a $4.7 million at San Bartolome and $27 million at Golden Queen. The majority of our capex was incurred at Golden Queen, particularly on the upgrade of our mobile fleet. We believe this upgrade will provide for operational efficiencies in 2025 and thereafter. Moving on to our operating financial performance. Q4 2024 silver equivalent production of 1.4 million ounces, an increase over the prior year due to higher ore tons mill, improved average head grade, and higher silver recovery rates. Full year 2024 silver equivalent production of 4.5 million ounces, a small decrease from 2023, primarily due to lower ore ton mill, partly offset by the improved grade and recovery rates. Revenue increased in Q4 and for the full year to $42.2 million and $126.9 million respectively, primarily driven by the high average realized silver prices and higher recoveries, partly offset by lower sales volume. Overall, Bolivian operational expenses have decreased on a quarter and year-over-year basis, due to the strengthening of our U.S. dollar relative to the Bolivian Boliviano. We continue to see favorable conditions in the Bolivian Boliviano relative to the U.S. dollar and expect these conditions to continue in 2025. Mining and ore purchase expenditures increased in Q4 and for the full year, reflecting the transition to exclusive ore purchasing and processing activities, which traditionally have lower margins as compared to typical mining activities. Milling processing and indirect costs decline, benefiting from favorable foreign exchange conditions. Cash cross-operating margin and gross margin ratio both increased in Q4 and for the full year to 11.09 and 43.26%. and 9.15 and 38.41% respectively, supported by higher realized silver prices, a lower cost of sales per silver equivalent ounce. Capital expenditures decreased in Q4 and for the full year, primarily due to the commissioning of the fines deposit facility in Q2 2024, reducing capital outlays for the remainder of the year. Moving on to gold in Queens, Q4 2024 gold equivalent production, 11,774 gold equivalent ounces, a decrease from Q3 2024 due to a temporary suspension of operations of the crushing and stacking activities in September 2024, which impacted gold production into Q4. Revenue decreased in Q4 2024 compared to Q3 2024, primarily due to lower gold equivalent production, partly offset by higher average realized gold prices. Mining and processing costs decreased in Q4 2024 due to lower consumable sky to reduce production. Operating cash costs and all in sustaining costs both declined in Q4 2024 compared to Q3 2024, primarily due to lower cost of sales and lower sustaining capital, partly offset by lower gold and silver production. Capital expenditures declined in Q4 2024, as most of the company's 2024 capital expenditure program was incurred in the first nine months of the year. particularly in Q3. Capital expenditure program included the replacement of most of the company's whole truck fleet and the overhaul of existing mobile and fixed equipment. Moving on to our 2025 guidance. Consolidated production. We anticipate consolidated gold equivalent production to be in the range of 102.9 to 117.2,000 ounces of gold equivalent. This represents a small increase to our 2024 gold equivalent production, representing higher recovery in San Bartolome, and a more steady production environment with less equipment downtime at Golden Queen. Consolidated production. We expect Golden Queen operating cash costs of $1,500 to $1,800, and holding sustaining costs of $1,950 to $2,150. San Bartolome cash gross operating margin of 6.5 and 8.4, and gross margin ratio of 29 to 36%. Total capital expenditures. expected to range between 28.2 million and 32 million. This includes sustaining capital of 18.3 million to 20.2 million, and growth capital of 9.9 to 11.8 million. On San Bartolome, sustaining capital between 5.6 million to 6.2 million, driven by tailings expansion and processing upgrade projects. At Golden Queen, sustaining capex between 12.7 million to 14 million, focused on stacking system and process plant equipment replacement, overhauls of existing equipment, upgrades to crushing equipment, and growth capital between 9.3 million to 11 million. focused on initial capital outlays for a new phase of the heat bleach pad, purchase of new hole trucks, and investment into a new production water well for future mine production. With this, this concludes the financial review of our Q4 and 2024 results. I will turn the call back over to Alberto for closing remarks. Alberto.

Thank you, Juan Carlos. As mentioned in my initial remarks, 2024 was truly a transformational year for Andean. We fully integrated gold and green into our operational portfolio, generated record revenue, adjusted , generated significant free cash flow, and strengthened our management team. We doubled the size of our company in many metrics, such as revenues and production. All of these with zero dilution towards shareholders while increasing our liquid assets. We look forward ahead for 2025. We remain focused on operational efficiencies, continuing our regional exploration efforts at Golden Queen, securing more oil purchases agreements at San Bartolome, and inorganic growth opportunity as well. I am excited. about the journey we're on and we thank you for your continued support. We look forward to sharing more updates on our progress in the coming quarters. With that, I will hand the call back over to the operator for Q&A.

Thank you.

Operator?

Thank you. At this time, we'll begin the question and answer session. To ask a question, please press star and then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing any keys. To answer all your questions, you may press star and 2. Once again, that is star and then 1 to join the question queue. Our first question today comes from Justin Chan from SCP Resource Finance. Please go ahead with your questions.

Hi, guys. Thanks a lot for taking the questions, and congratulations on another really strong quarter and a strong year. My first one's on San Bartolome. If I may, I think guidance after Q3 was updated to $7 CGM and 30% margin, and you did 11% Dollar CGM, 43% margin before and you're well above guidance for the year. So just looking at this year's guidance, it's for margins to come down a little bit. I'm just curious, what are the moving parts? And, you know, if prices don't change, kind of what to expect?

Yeah, hi, Justin. Thanks for being on the call. Good morning. It's JC. Quickly, with respect to the CGOM, the main driver is obviously the solar price. And with respect to the gross margin ratio, the main driver is the Bolivian effect. Those are the main drivers for those two parameters.

Yeah. Gotcha. So I guess if prices and effects don't change, You know, how would your margins look versus, say, the guidance that you put out today of $6.50 to $8.40 and 29% to 36%?

Again, I think it all depends on the Bolivia and Boliviano. As you know, it has been distancing itself from the official exchange rates. If that continues to be the case, we will continue to see benefits from our local operating expenses. And then on the gross margin ratio, well, it will depend on where solar prices end up, right?

Gotcha. I can see that guidance is fairly conservative, but, for example, if we stay as we are now, would your numbers look more like they did in Q4 than maybe your guidance?

Yes, I think you're right, Justin. It's a conservative approach, but with the caveats of where the silver price and the Boliviano currency rate will be.

Okay, thanks. No, that's helpful. I mean, you definitely surprised the upside quite a lot last year, which is great. Just want to make sure that we're kind of aware of what to expect. Thanks. And then I guess on Golden Queen, if I could ask on your exploration plans and thoughts on when you might be expecting to update your resources and your mine plan.

If you want here, I'm going to take that question. So I was at Golden Queen last week, and I see tremendous potential first with Gainesville willing to transfer maybe some stuff that we're mining now into reserves and after that into reserves. So this is great news, I think. And on the exploration perspective, we have very, very good targets. We received some really promising results as well. So we're still developing an exploration strategy for this year based on that, making sure that we align. with business continuity at Golden Queen. And hopefully we're gonna be able to give you some more colors on the best strategy in the next quarter call.

Okay, thanks. But in terms of, I guess, that exploration strategy, is that accounted for in your capital guidance?

Yes, it is.

In terms of like, have you allocated funds for exploration in those budgets?

We did. We did, absolutely. But, I mean, we may, I mean, by looking at all that, we may add some more funds, I mean, if we believe that the return is quite quick.

Yeah, absolutely. Okay. And conceptually, what would be, I know you have to review, but is it something that could be updated this year? Is it more likely next year? I'm just trying to get a sense.

I guess we want to come back to you about that. I mean, we still have to do some work, but again, this is an active conversation here, and the goal would be to give some use and expression within the next, I would say, few quarters.

Okay. Great. Thanks. And maybe just one last one. You've built a very strong balance sheet. you know, took on a bit of debt to acquire Golden Queen. You've now generated quite a lot of cash, and you're back in that cash position. What's your thoughts on capital allocation? I know growth is a priority. You have a share buyback. Just can you give us a sense of what to expect?

Yeah, Justin, hi. Let me tackle that one. Definitely we have, as you know, we've been publicizing every month the amount of shares that our NCID program is purchasing in the buyback. It's been conservative this year. So we're still using our cash. We believe that at this level it's a very good use of our cash to start doing some shares buyback. That's number one. And with respect to the growth, inorganic growth, We're still actively looking for inorganic growth in connection with potential targets that we can try to see on the current market conditions as well. So, we intend to continue building our, let's just call it a war chest in the balance sheet for those purposes. I think the sustaining and growth capital expenditures are basically really, really good because what we would like to accomplish is we would like to accomplish some of the investments this year to try to, in a way, improve efficiencies going forward.

Yeah. Gotcha. All right. Thanks very much. Thanks, Alberto, Johan, and JC. I'll stay on the line. Thanks very much.

Thank you.

Once again, if you would like to ask a question, please press star and 1. Our next question comes from Ben Puri from Atrium Research. Please go ahead with your question.

Hi, guys. Congrats on a great Q4 in 2024. Just a couple quick questions here. Could you just expand on the cap expand at Golden Queen? What impact the initiatives from 2024 will have on 2025 production and operations? And then going forward, the CapEx spend in 2025, what kind of effect that will have over the long term?

Yeah, this is JC. Hi, man. Thanks for being on the call. So this is a capital expenditures program we started last year. We are fully – this year we will complete the full replacement of our haul trucks. We're also starting this year to build our new pad that will start to be used late next year. And overhauls, it's the continuation of that revamping of most of our mobile equipment. I think the majority of the capex being allocated this year are within those three concepts, Ben.

Okay, thank you. And then on the equipment, what kind of efficiencies can that bring to the operation and production specifically around costs or production throughput increasing?

Yeah, that's a good question. For example, with respect to the whole trucks, we're getting obviously more efficient bigger beds, more fuel efficient. We're also working to design to better improve the distance between the bin and the crusher. So, we do expect some good efficiencies from getting those new trucks. Obviously, the major overhauls, the required maintenance will be much lower. So, we do expect not only efficiencies, but cost savings down the road.

Yeah, understood. Looking forward to seeing that. And then moving over to San Bartolome, can you explain the decrease in tons milled in 2024 compared to 2023? And then if it's anything material, what have you guys done to make sure that production remains steady through 2025?

Yeah, so bear in mind that in December, in late 2023, we decided to stop mining from our own deposit. As you know, it was depleting, and we decided to free up that capacity in our plans for better ores that we could buy locally in Bolivia. So, I think that had an impact compared to 2023. And also, we had, I would say, as we mentioned on our opening remarks, we had a lower production on our tailings recovery. And we are working on trying to improve those, that production from the tailings this year. I think those two are the main impacts if we compare 2023 to 2024 on production.

Okay. Okay. Thank you. And then last question is around margins with silver and gold, you know, the price being so high. Are we expecting margins to compress at all just given? your ore sources are able to send lower grade ore and still be processed profitably, or are you guys maintaining a certain grade at San Bartolome?

Well, I think, you know, with respect to, you know, the strong silver prices, we might, you know, yes, see, we're going to be paying more. in some cases, for the ore we buy because it's a formula based on international prices. But at the end, we'll, as we have always said, a semi-processing facility, we always go and look for the refining margin, right? So, it could happen, squeeze a little bit margins, yes, but we will always have that spread, or we believe we'll have that spread.

Yeah, understood. Okay, thanks, JC. That's all I have for today.

Thank you, Ben.

And ladies and gentlemen, with that, we'll be closing today's question and answer session. I'd like to turn the floor back over to Alberto Morales for any closing remarks.

Thank you, operator. And I want to thank everyone for joining us today. We remain committed to driving our business forward and look forward to sharing our progress in the quarters ahead. Thanks again and have a great day.

And, ladies and gentlemen, with that, we'll conclude today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.