Andean Precious Metals Corp.

Good morning. Welcome to Andean Precious Metals first quarter 2025 results conference call. As a reminder, all participants are in listen-only mode and 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 then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to Dom Kaiser with VP Finance. Please go ahead.

Thank you, Operator, and good morning, everyone. Fortunately, Amanda Mallow is off this morning due to an illness, and I'm filling in as host for this call. Before we get started, I would like to point out that during today's call, we make forward-looking statements as defined by under Canadian securities law. I ask that you view our slide presentation for cautionary language regarding forward-looking statements and risk factors pertaining to these statements. Our press release, MD&A, and financial statements are available both on CEDAR Plus and on our corporate website, AndeanPM.com. With us on today's webcast is Alberto Morales, Andean's Executive Chairman and CEO, Johann Bouchard, Andean's President and Juan Carlos Sandoval, our Chief Financial Officer. Following management's formal remarks, we will then open the call to questions. And now, over to Alberto.

Thank you, Dom, and welcome, everyone. I am pleased to report that Andean delivered a strong start to 2025. In the first quarter, we generated consolidated revenue of $62 million, a 44% increase over Q1 of last year, driven by higher realized gold and silver prices and a solid production performance across both of our operations. We produced 21,361 gold equivalent ounces in the quarter, slightly ahead of Q1 2024. And more importantly, our gross operating income grew significantly to 23.1 million compared to just in the same period of last year. This strong operating performance flowed through the bottom of the line, resulting in a net income of $14.6 million, or $0.10 per share on a diluted basis. Our balance sheet remains a real strength. We ended the quarter with $75.7 million in liquid assets, up from 61.4 million a year ago, while also reducing total liabilities compared to end of the year 2024 by 8.9 million. In addition to these financial achievements, we continue to deliver on several strategic initiatives. We completed our graduation to the TSX main board in January. reflecting the growing scale and maturity of our business. We also announced positive exploration results at Golden Queen, which we are already shaping our 2025 exploration plans as we work to extend the mine life, which we will touch on later on this call. Finally, we strengthened our leadership team with the incorporation and appointment of Joanne Bouchard as president of the company. Overall, it was a very strong start to the year, and we are well-positioned to continue building on this momentum. With that, I will now turn this over to Johan to walk you through the operational results in more detail.

Well, thank you, Alberto, and good morning, all. So, gold equivalent production in Q1 was 21,361 ounces, a slight increase from the same period of last year. Their production increase is driven by higher production at San Bartolome, which is partially offset by slightly lower gold equivalent production at Golden Queen. Revenue for Q1 2025 is $62 million, a significant increase in comparison to $43.1 million in Q1 2024, largely driven by higher average realized gold and silver prices and increased sales volumes. Better cash growth operating margin at San Bartolome is driven by favorable foreign exchange currency, better processing recovery, and higher throughput. Lower operating cash costs at Golden Queen in comparison to the same period of last year is due to the deferred stripping, which is allocated to the sustaining capex, and cost allocation to growth capital for the construction of an optimized main all-road. Higher all-interface costs in comparison to the first quarter of last year is due to the stacker replacement cost, improvement to the crusher circuits, and overall on production equipment. Looking at operation, I will begin by sharing an update on San Bartolome, where we see notable increase of production and better costs. Historically, Q1 is the slowest quarter for San Bartolome due to the seasonal weather condition impacting the operations. Gold equivalent production for Q1 2025 was 10,172 ounces driven by higher mill throughput. Higher silver recovery and higher gold grade partially offset by lower silver grade in comparison to the same period of last year. Operating expenses were positively impacted by several foreign exchange reflecting lower cost of sales. Revenue increased significantly compared to Q1 2024, largely due to higher average realized silver price and the gold and silver production increase. Net inventory movements in Q1 2025 can be explained by the timing of gold and silver sales at the beginning and the end of the period. Capital expenditure are lower due to the completion of the fines deposit facility construction in the first half of 2024. Overall, we continue to demonstrate a strong cash operating performance with an increase in cash growth operating margin and growth margin ratio, reflecting higher silver price and better operating costs. Now turning to gold and queen. So gold equivalent production for Q1 2025 was 11,189 ounces, which is aligned with the first quarter of 2024. On an operational perspective, Total tons mined is lower than the same period of last year, while the stacking rate is higher, which is due to the mining sequence and the stacking capacity. The stacker was replaced at the end of the quarter, and increasing stacking performance is anticipated over the next couple of quarters. In the first quarter, gold inventory increased at the leach path, which is expected to be recovered in the upcoming quarters. Revenue increased over Q1 2024 driven by higher average realized gold and silver prices, more than offsetting higher capital expenses in comparison to the first quarter of last year. As mentioned previously, lower operating cash costs can be explained by different stripping costs and costs allocated to growth capital regarding the construction of the optimized always road. which should be complete in the second quarter. The new oil road will significantly decrease the cycle time and subsequently the oiling costs. The higher oil and sustaining costs is used as a factor replacement cost and timing related to the maintenance on fixed and mobile equipment with the objective of decreasing operating costs. On the following slide, I would like to touch on our 2024 exploration activities at Golden Queens and our plans for 2025. As we share on May 1st, 2025, we're pleased with the progress on our exploration program as we look to extend the life of mine at our Golden Queen operation. Our exploration focus remains on expanding the current mining zone on the south side of the open pit with the ultimate objective of increasing the life of mine. The key highlights from our 2024 exploration program were the following. We complete 29 shallow infill reverse circulation drill holes, 4,617 meters. This included work in the Silver Queen, Southeast Trent, and Alpha Sun, confirming the geological model and validating our approach for the next phase of core drilling. We drilled 23 core holes totaling 4,123 meters and successfully intersect gold and silver in all 23 holes. The objectives were to increase mineral resource and reserves in the Silver Queen Southeast and Alpha Sun area, as well as to test the Iltap geological continuity. Here are some notable results. At Silver Queen Southeast, 12 core holes extended dematerialization by 100 meters on strike, including OSQ24-06 with 1.67 gram per ton of gold over 5.5 meters. At Al Sassan, seven core holes including AL24-02 intersecting 0.88 gram per ton of gold over 93 meters. And finally, at Hilltop, focal holes, including SQ24-12, which returned 1.67 gram per ton of gold over 6 meters, starting at only 18 meters from surface. These results confirm our positive view on gold in Queen's exploration potential. We are very pleased with the Hilltop area, which provides short-term mining flexibilities. In fact, we anticipate first ore from Hilltop in Q3 2025. Now for 2025, we have allocated an initial budget of $2.8 million to continue with the exploration strategy, focusing on reserve and resources development. The program includes 4,267 meters of drilling in the Silver Queen Saudis extension, IELTA, and Alpha Sonaria. We plan to release more exploration results in the second half of 2025, and we will update our Golden Queen technical report in the second quarter of 2026. With that, I will now turn the call over to JC to take you through the financial highlights. JC?

Thank you, Johan. Good morning, everyone. Let's go over the key financial highlights for the first quarter of 2025. Revenue for Q1 2025 totaled $62 million, a 44% increase from 43.1 in Q1 2024, driven by higher average realized gold and silver prices and increased production. Cost of sales decreased by 10% to $36 million, from $40.1 million in Q1 2024, mainly due to the disciplined cost management, improved productivity, and favorable exchange rates at San Bartolome. Gross operating income increased significantly to $23 million from $312,000 in Q1 2024, reflecting the higher revenue and improved cost structure. Net income for the quarter was $14.6 million, or 10 cents per share, compared to a net loss of $76,000, or $0 per share in Q1 2024. Adjusted EBDA was $21.9 million, up from just $1 million in the prior year, reflecting strong operating performance. Free cash flow improved to negative 1.5 million, and improvement from negative 8.1 million in Q1 2024, thanks to better operating cash flows, partly offset by higher capital expenditures. Capital expenditures were 9.4 million, up from 3.4 million in Q1 2024, as we continue to reinvest in our operations, particularly at Golden Queen. Cash and cash equivalents were 53.1 million at the end of the quarter, up from 41.5 million year-over-year, reflecting strong cash flows from operations. We continue to demonstrate a very strong balance sheet. During Q1 2025, we made improvements in our net asset and net liability positions with significant accounts payable and tax payments. all while maintaining a strong cash and liquidity position. Liquid assets are metric when looking at our total cash and investments list, our line of credit was 75.6 million as of Q1, 2025 versus 61.4 million at the end of Q1, 2024. And now I'll hand it over to Alberto for closing remarks.

Thank you, JC. As we discussed earlier, exploration remains a critical pillar of our strategy. We are encouraged by the progress of our 2024 drilling campaign at Golden Green, where we've seen promising results that could significantly expand our resource base and enhance the mine life. Our exploration team continues to target high potential areas, and we are committed to advancing these efforts through 2025. Our approach to capital allocation remains disciplined, with a clear focus on investments that drive long-term growth and improve operational efficiency. We are prioritizing the continued development of Golden Queen and San Bartolome, as well as key exploration projects that present the highest return potential. Looking ahead, we expect production to ramp up in Q2 with steady and sustainable production levels in the second half of the year. As previously communicated, we are maintaining our full year guidance and we anticipate stronger results in the later half of 2025. A key part of our growth strategy includes seeking strategic M&A opportunities to further enhance our portfolio. We are evaluating potential acquisitions that align with our long-term goals and can add significant value to the company. These opportunities could enable us to expand our resource base and improve our operational footprint, all while continuing to maintain our disciplined approach to capital allocation. With that, I now would like to turn the call over to the operator and open the floor for questions. Operator?

Thank you. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. The first question comes from Justin Chan with SCP Resource Finance. Please go ahead.

Hi, guys. Thanks very much for the update. My first question is just regarding – so I think this Q1 was pretty in line on operating metrics. There's just some difference between, let's say, EBITDA and operating cash flow just on working cap. Could you talk us through, I guess, the changes there on inventory and payabilities, and do you expect that to unwind through the year, or is your current working capital levels where you expect them to stay? Okay.

Thank you, Justin. I think from a working capital perspective, I think we're pretty much in line. I think that's what we expect to see throughout the year. And I guess with respect to the inventory levels, I guess the same pretty much stable. We can get back to you on that, but I would assume they would remain pretty much stable as they are right now.

Okay, gotcha. Thanks. And then just in terms of the improvement through the year, I guess, could you just maybe talk through, I guess, at San Bartolome, is that, are there any key factors driving that there, or is San Bartolome more steady through the year? And then at Golden Queen, is that mainly driven by the grade profile?

Yeah, I got to answer that, Justin. At San Bart, the increase in production is mostly driven by grade over the quarter over quarter. and at Sandbar is by, I would say, stacking. Stacking performance.

Got you.

So Sandbar is really... Yeah, sorry about that. Sandbar is more about grade, and Golden Queen is more about the stacking performance. Sorry about that.

Okay, yeah, that makes sense. I was trying to mentally wrap. It's like stacking at... San Bart, maybe I need to rethink the operation. Okay, so it's going to be volume-driven, essentially more volume through the year at Golden Queen, and at San Bart it's more grade-driven. That's correct. Gotcha, thanks. And then in terms of updating your resort and your mine plan, what's, I guess, you know, based on your current exploration budget, what's your thinking on timing there?

Yeah. Yeah. So what we did basically is we compiled the drilling campaign of 2024 in our new model. It's almost done. We're validating it now. Hopefully, we're going to do – we're trying to fast-track our exploration campaign this year to, I would say, add as much more as we can information for the new reserve and resources update that we're planning to start beginning of September to have it ready by year-end. But, yeah, overall, everything is balancing well. And based on that, we're looking at producing a technical report. But, yeah, I'm really pleased with the results that we have. So, I mean, on the technical aspect, it's balancing really well. And actually on the operational aspect as well, I mean, we're making good progress at Golden Queen.

Gotcha. So effectively, the cutoff date for drilling will be maybe something like September, and then the reserve state will be effective end of the year?

You're planning to close the database on September 1st, and after that, do the work and have everything ready to have everything with the technical report aligned with our year-end reserve and resources.

Gotcha. And from what you see, how sensitive is it to pricing, and how much of a consideration is that as you kind of look at What's the update?

We're not there yet. We're not there yet. No, we're not there yet. I mean, we're still working on basically what we're doing now. We're using pretty much the same gold and silver price as we had before, and we're going to adjust all that in time.

Okay, great. Thanks very much. I realize I've asked quite a few, so I'll free up the line and then rejoin. Yeah, there's time later.

The next question comes from Alison Carson with Desjardins. Please go ahead. Thanks.

Good morning, everyone, and thanks so much for taking my questions today. My first question is on CapEx at Golden Queen. In terms of spending for the remainder of the year, is CapEx expected to be lighter in H2 or should it be pretty even over the remaining three quarters?

Hi, Allison. So, yeah, we're sticking, as Alberto mentioned, we're sticking to our guidance, which is between $28 and $32 million. Most of it will be headed to Golden Queen, of which around 12 to 14 on sustaining and 9 to 11 on growth. Yes, it's mostly front-ended, as you've probably seen. We already invested $9 million this quarter. So I think for specifically on Golden Queen, it'll be roughly around $4 million in sustaining topics per quarter for the rest of the year.

Okay, great. And then in terms of exploration at Golden Queen, are there any areas you're particularly excited about for the 2025 program? And could your initial budget be increased based on drilling success? And then just finally, how are you thinking about exploration beyond the revised technical report next year? Will drilling be focused more just on reserve replacement, or do you expect to do more exploration-based drilling as well on an annual basis?

I think that the idea is really to focus on Alpha Sun and I would say all the southern section to extend the deposits in that direction. We saw that the hilltop zone is expanding the current PIP by about 100 meters in strike. Overall, I mean HIPs. So we may continue to explore that zone with the objective of increasing reserves. That's the main idea, increasing life of mine. And starting really by, I would say, nearby by the, I would say, where the pit design is and extending on the south side. And I would say Al-Fasan is quite interesting as well. This is kind of a new zone. We do have some reserving resources there, but it seems like the model that we have I mean, the drilling, the campaign that we designed brings some really good results, so we're really happy about that. But I would say to increase reserves, we're going to more focus on extending the south side of the open pits.

Okay, great. Thanks so much for taking my questions and the additional callers.

The next question comes from Ben Perry with Atrium Research. Please go ahead.

Hi, Alberto and JC. Congrats on a great quarter. Being our estimates pretty broadly across the board, most of my questions have been answered, but just on Golden Queen with regards to the operating cash costs coming in lower than our expectation, should we expect this to continue into Q2 and the rest of the year? You sort of mentioned it had to do primarily with the stacker being replaced, and so I would assume that that's going to continue over the next few quarters here.

Yeah, I think, Ben, that's correct. I think we're – same thing. I think we're well within the guidance of 15 to 1,800. Right now it's been more on the low side of the guidance, so we're very comfortable with confirming that range.

Okay, great. Thank you. And moving over to Sandbar, obviously the gold price is still continuing higher. How do you expect your ore sourcing to change? Will you be receiving lower grade material now that the prices are higher and therefore will margins compress? Or how do you expect margins to continue throughout the year as gold continues higher here?

Yes, let me respond to that. In Sambartolome, we're actually pursuing different sites that our exploration team is looking at so that we are trying to look for higher grade zones. It is one of our main purposes of Sambarta, as it was explained before by Joven, that results in Sambarta is going to be mostly driven by higher average silver grades. So we're focusing on that. Obviously, having said that, to the extent that we still find that it's not as high as we were expecting, the higher current spot prices also certainly would motivate us to continue increasing the throughput in there as we can now be more flexible on getting maybe some lower grades that we wouldn't have otherwise taken. But it is our intent to focus primarily on trying to secure higher grade ore by sending our exploration and geologist team to search for new areas around the vicinity of the plant.

Okay, thank you. And sort of jump back to Golden Queen, but I figure I'll ask this quickly. Just on what Justin sort of touched on and how production ramps pretty significantly from Q1 through into the back half of the year, you mentioned it's mainly volume-driven in terms of that ramp. Do we expect that to continue into Q1 of next year, or will things sort of settle back down to what we sort of saw in Q1 of this year? from a production standpoint.

What we see based on our mine plan is we see our ramping up in Q2 and Q3 to stabilize in Q4 and going forward. That's what we see in our mine plan. Okay. Amazing. Thank you, guys. That's all I had today.

Okay. We have a follow-up question from Justin Chan with SCP Resource. Please go ahead.

Hi, guys. Just one on Sambar Ptolemy. As has been quite frequently the case, your margins are running well above your guidance. I'm just curious if everything stays the same on pricing and FX, what is your thinking there? Would your current margins in Q1 be what you would expect to stay?

Justin, it's dependent, always dependent on two things, prices and then the Boliviano. It has an important impact on our margins. So, it will depend mostly on that, I would say.

Gotcha. But I guess if you assume neither of those change from this point onward, is your margin in Q1 a fairly representative number? Oh, yes. Yes, I agree.

I think it's a good average if you want to take it like that. Yes.

Okay. All right. Great. Thanks very much. That's all I had. Thanks, guys.

This concludes the question and answer session. I would like to turn the conference back over to Alberto Morales for any closing remarks. Please go ahead.

Thank you, Operator. And thanks, you all, for joining us today. We are very pleased with our Q1 2025 results. With a strong balance sheet, an experienced leadership team now in place, and a clear growth strategy to drive the business forward, we're well-positioned to pursue our vision of transformational growth into a mid-tier producer. Thanks again for joining, and have a great day.

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