Andean Precious Metals Corp.

Good morning and welcome to Andean Precious Metals second quarter 2025 results conference call. As a reminder, all participants are in the 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 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then 0. I would now like to turn the conference 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 on today's webcast is Alberto Morales, Andian's Executive Chairman and CEO, Johan Bouchard, Andian's President, Juan Carlos Sandoval, our Chief Financial Officer, and Dom Kizak, our VP of Finance. Following management's formal remarks, we will open the call to questions. And with that, I'll turn the call over to Alberto. Alberto.

Thank you, Amanda, and good morning, everyone. I am pleased to report that Andean delivered another strong quarter operationally and financially. We delivered record quarterly revenues of 73.7 million, supported by stronger realized metal prices and steady performance at both of our operations. Adjusted EBITDA rose to 28.9 million, the highest in the company's history, while net income essentially doubled year over year to $17.4 million, or 12 cents per share. Our balance sheet strengthened significantly during the quarter. Leveraging on our strong cash position, we made the strategic decision to fully repay all outstanding amounts under our revolving credit facility. reducing total debt and ending the quarter with $87.3 million in liquid assets. The $25 million revolving line of credit remains fully available, giving us significant additional financial flexibility. Operationally, San Bartolome delivered solid results with improved margins. On the back of strong silver prices, continued favorable foreign exchange rates, and steady plant recoveries. We have revised our 2025 margin metrics upward for cash growth operating margin and gross margin ratio. San Bartolome remains on track to meet full-year guidance. Golden Queen also remains on track to meet full-year guidance with production expected to ramp up in the second half. supported by key capital projects completed during the quarter. We continue to advance our organic growth strategy. Exploration drilling at Golden Wing, still ongoing, following the encouraging resource release in May, and we see strong potential to extend mine life to near mine and regional targets. We expect to provide an update on results to the market in Q4. It was a strong first half of the year, and we believe the momentum we have built sets up well for the remainder of the year 2025. With that, I will now turn it over to Johan to walk you through the operational results in more detail.

Well, thank you, Alberto. So let me start with consummated production, which totaled 24,341 gold equivalent ounces in Q2. As previously guided, production will be weighted toward the second half of the year and will remain on track to meet full-year targets. At San Barcelona, we produced 12,128 gold equivalent ounces during the quarter. Our cash growth operating margin improved to $13.89 per ounces, benefiting from higher silver price, stable recoveries, and foreign exchange rates. The growth margin ratio improved to 45.9%, up to 20% in Q2 last year. The processing rate averaged 110,000 per month in Q2 with a steady recovery of 83%. As a result, we're pleased to have increased our cash growth operating margin and growth margin ratio full-year guidance, reflecting the operation's solid cost control performance, the most favorable foreign exchange rate and middle prices than initially anticipated. We expect this trend to continue for the remaining of the year. Following the exclusive long-term purchase agreement of 7 million CUN announcements, the company is collaborating with CUNEBOL to obtain the required environmental permit and social licenses and to prepare the respective mines to begin operations. The company anticipates first ore in the second half of 2026. The agreement provides the company with additional prospective upside deposits that will increase our sourcing for the year to come and ultimately leverage processing capacity, which is currently underutilized. Switching over to Golden Queen, we produce 12,213 gold equivalent ounces in Q2, while lower year-over-year, this was expected due to the mine sequencing and the hourly chain schedule. During Q2, gold in inventory on the leach pack increased due to the improved stacking performance. Gold in inventory is anticipated to decrease in the upcoming quarter when the extra tons stacked will commence reporting to the Merrill-Croll process. Key capital projects were completed during the quarter. Improvement to the main oil load was completed early June, reducing hauling distances and cycle times. and is expected to improve the fleet productivity, resulting in lower unit costs going forward. The E-Fleet Stab Stature was replaced with a 158-foot telescopic superior stature with automated capacity. Two additional 115-foot superior grass upper and 160-foot superior indexing conveyor were purchased in Q2. Costs at Golden Queen are trending well with a cash cost of $1,717 per ounce, which is in the range of the guidance, and an all-in sustaining cost of $2,245 per ounce, slightly above guidance due to the timing of capital investments. We expect higher production and lower hit costs in the second half of the year with Q3 and Q4 reflecting better stacking rate and a decrease in gold inventory on the leach tabs. We continue to reaffirm our production and cost guidance for the year. Exploration developing is underway, and we remain encouraged by the results released in May. Our goal is to convert near-pit targets to mineral resources and evaluate the upside across our 3,000 HECPAR LEM package. Before I hand it over to JC, I'd like to reiterate our 2025 guidance. As planned, production remains weighted approximately 40% in the first half and 60% in the second half of the year. We are expecting production to ramp up quarter over quarter in the second half of the year, with our best quarter being in Q4. At San Bartolome, based on a strong Q2 performance we're probably revising our full year margin matrix. Cash growth operating margin is now expected to be in the range of $8 to $13 per ounce. And growth margin ratio is now expected to be in the range of 35 to 45% for the fall in year 2025. At Golden Queen, we are reaffirming our previously disclosed guidance. full-year production of 52.2 to 60.6 thousand gold equivalent ounces, cash costs of 1,500 to $1,800 per ounce, and all-in sustaining costs of 1,950 to $2,150 per ounce. Consolidated capital expenditure remains in the range of 48 to $32 million for the full year. Now I will pass it over to JC to take you through the financials.

Thank you. As noted, revenue for Q2 was $73.7 million, a 5.5% increase over Q2 2024. This was driven by higher realized silver prices, which averaged $34.36 per ounce, Gold prices averaged $3,316 per ounce and steady and operational performance at both assets. Gross profit increased 151% year-over-year to $29.4 million, driven by stronger commodity prices and margin expansion of San Bartolome. Net income practically doubled year-over-year to $17.4 million, or $0.12 per share. Adjusted EBITDA of $28.9 million was up 68% from Q2 last year, and our free cash before the quarter was $12.3 million. Turning to the balance sheet, during the quarter, as previously mentioned, we repaid all amounts outstanding under our revolving credit facilities. and ended the quarter with 87.3 million in liquid assets. The $25 million revolver remains fully available, providing additional strategic flexibility. Total liabilities declined to 139 million, while total assets increased to 321 million. Capital expenditures totaled 8.2 million in Q2, focused primarily on gold and queen infrastructure. With commodity prices remaining strong and our disciplined approach to capital and operating costs, we are well positioned to sustain financial strength while continuing to advance our growth strategy. Now, I'll turn it back over to Alberto for closing remarks.

Thank you, JC. To wrap up, Q2 was another milestone quarter for Andean. We achieved record revenues, continued to generate strong free cash flow, and significantly enhanced our financial position. Both of our operations are performing as planned and well positioned for a stronger second half. We remain committed to developing on our 2025 guidance and executing our long-term strategy to drive sustained value for our shareholders. With a solid balance sheet, cash generating assets, and an active exploration program, we are excited about the opportunities ahead. Thank you for your continued support. And with that, I will open the line for Q&A.

Thank you. We will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. You will pause for a moment as callers join the queue. The first question comes from Justin Chan with SCP Resource Finance. Please go ahead.

Hi, guys. Can you hear me? Just making sure I'm not muted.

We do, Justin. Hello.

Alberto, congratulations on a good quarter and for all the progress, especially a nice pickup in the share price this quarter. my first question is just yeah thanks so my first question is just on Golden Queen it's a fairly big swing in grade and I guess the strip ratio also in Q2 I'm just curious you mentioned higher stacking in the second half in terms of grade could you give us a sense of what you're expecting in the second half is it more like this quarter or kind of somewhere in between Q1 and Q2 yeah

I just wanted to go on here. Thanks for the question. I mean, the grid is very, very stable at Golden Queen. So, we finished the mine, the pit one, and we're mining now the two other pits. So, we have all the equipment, I would say, centralized, which is improving productivity. But overall, regarding ton mine, it's going to be very consistent. We're having, I would say, a lower serving ratio than what we saw in our, compared to the budget. because basically we found a bit more than what we thought, which is a good news. But overall, basically, I mean, we don't see like a major or drastic changes with great quarter over quarter.

Okay, gotcha. So around that kind of point, let's call it 0.75, is that where you see it in the second half? Yeah, pretty much, yeah. Okay, thanks. That's really helpful. Okay, that's that on Golden Queen. On St. Bart, the updated guidance is definitely helpful. I think it's definitely more in line with what you've been reporting. I'm just curious if – I ask this question every quarter, but if prices and, let's say, FX stay where they are, would your margins be similar to what they were in Q2, or would you expect them to revert more to the middle of guidance?

I think they would remain the same, Justin. Obviously, it depends on where silver prices end up, but I mean, it's fair to say that they would end up more or less the same.

Okay, great. That's really helpful. And then maybe just the last one. Do you have anything to note in regards to, I guess, working capital or tax payable timing to be aware of in the second half of the year? No.

tax payments? Yeah, hey Jeff, it's Dom here. Yeah, we have about $6 billion of tax payments going out in Q3, but otherwise we don't expect to anticipate any significant working capital dispersion for the second half.

Okay, so maybe just slightly more tax paid than maybe income tax on the income statement? Is that Just because of timing on payments? Am I understanding that correctly?

I think we reflected approximately the past payments for H2 were reflected in our Q2 P&L. But it was just timing on payments that's going on. But it's going to be approximately less than her income statement.

Okay. So a little bit less cash tax than income statement tax. Absolutely. Okay. And then presumably you'll pay the second half income tax in the first half of next year. Is that right? That is correct. Okay, great. Thanks very much. I have a couple more, but I'll pre-up the line and then see if there's time later. Thanks very much, guys.

Thank you. The next question is from the line of Allison Carson with Desjardins. Please go ahead.

Good morning, Alberta and team, and thank you for taking my questions today. My first question is just about Golden Queen. As you mentioned, we're seeing lower leaching recoveries compared to last year. Are these expected to last, and how should we think about this going forward?

Thanks for the question. Here's Yohan here. Basically, what we did is based on the kinetic, we did have a lower recovery in in Q2, but we did increase as well our stacking in the same period. So, as you know, leaching is not occurring the week after. So, I mean, based on that additional tons, I mean, we believe that the extra ton that's been put on the pad is going to leach in Q3 and Q4 and the following quarter. So, it's been in good shape. I mean, if you look at the mining, I mean, we put much more, I would say, ounces on the leach pad than what we leached. And with the strategy in place, we strongly believe that that goal is going to come out in the second half of the year.

So should we just expect higher stacking rates going forward, and then we'll start to see those leaching rates sort of stabilize over time?

Absolutely, yeah. So that's the goal. I mean, with the new equipment that we bought, I mean, we saw a massive increase with our stacking. So when we also, I mean, from the tips, what we do, we have the opportunities now, I mean, to, we have, we're mining a little bit smaller, so we increase our stock trial as well, and we have the ability to segregate lower grade and higher grade, and sending the higher grade to the leach path. And, I mean, the leaching is not a process, it's a bit more tricky than conventional processing plants, but I would say that the... The goal will come out, but it can take some time. And we also have to consider that the pad is getting higher. And so to reach a liner and to go to the neutral, I mean, the timing increased by about, let's say, 10 to 15 days per bench. So it takes some more time. So maybe we missed that during our planning, but I'm very confident that the goal will come. Okay, great. And the recovery will increase, yeah.

Perfect. Thank you. And then just as in Bartolome, can you give us a little bit more guidance on how the new agreement with Conviol will affect production in 2026, and maybe how we should think about grading variability with the new agreement?

I would say, I mean, we started the work, I mean, just to go back on that a little bit, I mean, we signed the agreement, I mean, that was quite good, and right away, I mean, we we would collaborate with Tommy Ball the next week to take actions to put those in production as soon as possible. I think that we have good intelligence on those places. We know where to look with Tommy Ball. And, I mean, we're reviewing that schedule on a monthly basis with the team, and we have been seeing on all fronts. So, basically, based on what we see, I'm really, I mean, it seems like we're on the right track. I mean, to the very first or sometime, I would say, beginning of the second half of next year. Maybe a little bit, I would say, before that, but I would say for many full quantities, I think there's going to be more in second half of next year.

Okay, great. And then just one final question on M&A. You know, we've seen both strong silver and gold prices this year. When you're looking at potential acquisitions, do you have a preference on whether you'd want a silver primary or a gold primary asset?

As we have always said, I mean, we're looking at everything. Whether it's gold and silver, I think we're, you know, that's what I can say right now. So we're looking at everything.

All right. Well, that's all for me. Thanks for answering my questions, and congratulations on a strong quarter.

Thank you, Alexander.

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

Good morning, Alberto, JC, and team. Congrats on another great quarter. Good start to the year, and obviously gold prices and silver is helping to accelerate this. So diving into a couple things here, just in terms of production weighting, you mentioned it's ramping through 2020. and then into Q4. What can we expect in Q1? And can you just explain this sort of reason for this production ramp throughout the year?

You mean Q1 of 2026, right?

Yes. Yes, sir.

I would say that, Ben, what we're doing, I mean, we're going to start our budgeting process in a couple of weeks. So I would say I would be a bit reluctant to answer that question for now, but I think that we, overall, we see a stable production year over year, and some improvements, and I would say, I mean, we may see some improvement, I would say, in the production profile based on perhaps too close a better recovery, but I guess we're going to try that rhythm when we get there, but at this moment in time, it's a bit, I would say, early to talk about that We don't have that information in right away, so it's going to be in a few weeks and a few months from now. Okay, no problem.

And then at Golden Queen, obviously a lot of the infrastructure upgrades you've made over the last year or so have taken place. What can we expect from a CAPEX standpoint for the back half of the year and then into, and I know that's in guidance, but Are we going to see CapEx start to drop down into 2026?

Thank you, Ben. Over the next few weeks, we will be working on our next year CapEx plan. What I can say, I mean, it should be probably lower. Yeah, the last year and this year have been, you know, it's the bulk of our main CapEx plan. There are some investments that still need to be made. We need to expand on the leach pack, for example. So I guess over the next few weeks, we'll come up with a new plan for next year's CapEx, but I believe it should be a bit lower, at least, than what we have done for this year.

Okay, thank you. And then at San Bart, you know, we've spoken a lot about this, or coming online in the back half of next year. You mentioned the plant's capacity is currently underutilized. Is there anything that you guys can do over the next year, more near-term initiatives, to bring online and sort of meet that capacity?

I think that, I mean, the action efforts are taking now, I mean, they are, I mean, the main focus for sure is going to be to increase that, I mean, to utilize that full capacity. I don't think there's nothing much we can do. I mean, we need to be, I would say, a little bit more efficient. I mean, we're also operating and helping with five different projects. So, we are, I would say, unlocking, I would say, all the transportation logistics and improving, I would say, mining in some of the projects. And in addition, I would say, by having more, I would say, I would say to get to that area. But I'm glad that you recognize that. I mean, there's a low in green food there that can be that we can leverage. And you can be sure that our objective is really to increase and reach that full processing capacity and hopefully at one point be in position to build a stockpile near the processing plants.

Right, right. Understood, okay. Yeah, I had a couple more as well, but again, we'll turn it back to you guys if there's anyone else in the queue. Thank you.

Thanks.

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

Thank you, operator. We want to thank everybody for its continued support. Q2 was a strong quarter. We are pleased by the results and look forward to the next second half of the year, as we have stated in our documents and throughout the call. So thank you very much. And with that, we'll conclude our earnings call for today.

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