Thank you, operator. Good morning, everyone, and welcome to the Avino Silver & Gold Mines Ltd. Q1 2021 Financial Results Conference Call and Webcast. On the call today, we have the company's President and CEO, David Wolfin; our Chief Financial Officer, Nathan Harte; our Chief Operating Officer, Carlos Rodriguez; and our VP, Technical Services, Peter Latta.

Thanks, Jen. Good morning, everyone, and welcome to Avino's Q1 2021 Financial Results Conference Call and Webcast. Thanks for joining us. Before we begin, please note that the full financial statements and the MD&A are now available on our website. On today's call, we will cover the highlights of our first quarter 2021 financial and operating performance and our plans for Q2 2021, and then we will open it up for questions. Please note that all figures are stated in U.S. dollars unless otherwise noted. It's hard to believe that it has been more than a year since we were first faced with the pandemic and the forced operational shutdowns. As I mentioned during our previous quarter and year-end call, I would like to say a special thank you to the management team in Mexico, led by Carlos Rodriguez, who adapted quickly and carried out critical tasks at the mine to ensure the safety of our employees and surrounding communities. In addition, I would like to extend my appreciation to our shareholders for their support and patience during last year while we experienced the temporary shutdowns due to COVID-19 and the temporary shutdown due to the strike at the mine. The 12-week strike lasted from July to October 2020. As the labor authority office in Mexico City remains closed due to COVID-19 protocols, the company is working diligently with its partners to ratify the agreement. The company is committed towards restarting production and mining operations as soon as possible.

Thank you, David. It's my pleasure to be on the call, and I would like to welcome everyone who has joined us and is viewing our presentation today. As you can imagine, Avino's operating results were impacted by a lack of production at the Avino mine. Having said that, we are now in the strongest financial position in Avino's 53-year existence. Our cash position at the end of the quarter was $27 million, which represents a 125% increase compared to $12 million at the beginning of the year. Working capital at quarter end was $31 million compared to $15 million at the beginning of the year, which represents an increase of over 100%. We continued with our plans to reduce debt during Q1, having lowered debt liabilities by a further $800,000 during the first quarter. This brings total debt reduction since the beginning of 2020 up to $8 million. We are happy to report that we expect to be debt-free other than payables and equipment leases by the end of Q3 of 2021, which allows Avino to maintain significant financial flexibility moving forward. During Q1, renewal revenues were generated. Any revenues generated were a result of the settlement of final invoices from 2020 and the renewal concentrate shipments during Q1 2021, and thus, no silver equivalent ounces sold. Avino reported mine operating losses of $700,000 for the first quarter, which is made up of $200,000 in standby care and maintenance costs and $500,000 in depreciation and depletion. Losses before interest, taxes, depreciation, and amortization were $1.7 million compared to earnings of $0.4 million in Q1 of 2020. Adjusted losses for Q1 2021 were $900,000 compared to adjusted earnings of $400,000 in Q1 of 2020. Avino reported net losses after taxes from continuing operations of $1.8 million or $0.02 per share for the first quarter, which includes non-cash losses of $1 million relating to the exercise of warrants in which Avino received proceeds of over $700,000 during the quarter.

Thank you, Nathan. Our regional plans for the year called for a 12,000-meter drill program, which was increased in March to a total of 30,600 meters of drilling. The increased drilling program is fully funded. We will continue in Q2 to target several areas of the Avino property, including the Avino vein, the Santiago vein, and the El Trompo vein. To date, 3,763 meters have been drilled. We are currently waiting for assays to be received. Another potential high-grade target that has been tested is called the La Malinche vein, which will be tested in Phase 2. It is similar in style to the San Gonzalo vein, a low-sulfidization epithermal vein. More exploration work is needed to confirm our understanding of the system.

Just starting with exploration, you mentioned that you're waiting for assays to come in. Any color on the timeline here? And then are you seeing any delays in turnaround times due to COVID?

It has been slow in getting them. Some have trickled in, but we're waiting for—we want to complete the program on a particular vein before we release results. So it's hard to say, but in the next few weeks, we should have some news.

Got it. Okay. And then just on the back of that, are the Phase 1 and Phase 2 programs, are they sequential or concurrent?

Jake, this is Peter here. Regarding the program, there are some areas like, for example, below ET that we have to wait until there's underground access. So we're kind of jumping back and forth, just depending on drill availability and relative location. So to answer your question, I guess they would be more concurrent.

Okay. That's helpful. And then just lastly on the tailings project. You mentioned that you might move forward with the PFS later this year. Assuming you do that and the PFS is positive, are you comfortable making a production decision on the back of the PFS? Or do you think you'd move forward with a full phase?

Saying we'll have the PFS this year is probably a little aggressive. I mean we're drilling, and it takes time to do that. So it really depends on the results of the PFS before we make a construction decision.

Okay. But you'd be comfortable making a construction decision off the PFS, not necessarily moving to full feasibility.

Jake, Peter here once again. I think it just depends on the risk that we're looking at in terms of that particular project. I think there's limited geological risk given that the tailings are evenly disseminated. And that depends on the metallurgical work and the variability at that point in time. So I think it's too early to say at this point. But certainly, pending the results of the PFS, we'll evaluate and then make a decision at that point.

This is Tyler Bisset on for Heiko. You talked about your drilling program in the release, and it's nice to see the increase in holes drilled that was initially announced on March 8. You mentioned that you're waiting for some assay results in the recent release. But from what you can see thus far, can you sort of guide us through the potential continuity you think you might see at Avino ET?

Sure. I can jump in there. So with respect to ET, a lot of those holes are drilled from underground. Well, all of those holes are drilled from underground. I should take that back. So we haven't started that drilling there as we have to do a bit of work in the underground, and then we have to blast a drift, cross-cut actually. So we can drill back across the deposits. So the drilling for this quarter of Q1 was really focused on El Trompo and Santiago, with Trompo being that offshoot of the Avino vein and Santiago being that crosscutting the structure across San Gonzalo vein. So to answer your question, we haven't yet tested the continuity of Avino, both down-dip and on-strike.

Got you. And any expectation on when you guys may start that drilling?

We have people in there now. They're servicing the pumps and the electrical system down there. So we're bringing back people. So it's hard to say because we want to get the drilling and the blasting and the mining going first, and then we're going to look at drifting away from the vein and then setting up the drill station. So it's going to be in the second half of this year.

Okay. I appreciate that. And what do you think we will see in the total expenses for the ramp-up in Q2? And how much have you incurred as of today, given we're halfway through the quarter? And maybe, if possible, give us some guidance for spending during Q3 as well.

Sure, Tyler. It's Nathan here. So are you referring to ramping up, getting closer to production? Or are you talking about exploration spending?

Exploration spending.

Sure. Yes. We're expecting that to increase. Obviously, we announced up to 30,000 meters, and we're ramping up. April was a lot heavier than March was in terms of meterage, and we're continuing on that path into March— or in May, June, and further into the second half. We've got all three drills turning right now, which is great. So we kind of— we're expecting that if we continue on the same meterage about anywhere from $0.5 million to close to $0.75 million maybe on a monthly basis. So we're expecting a couple of million dollars per quarter as a maximum, and that depends obviously on how quickly we're able to move the drills around, too.

Just a question. You had a pretty busy quarter on the finance side. So you've got $27 million in cash here, now $30 million in working capital and $9 million to $11 million budget. So that's still a pretty healthy cushion, assuming you're going to get back into production between now and the end of the year. So what are your plans for that additional cash?

Nathan here, Matt. It's a good question. Obviously, we are looking forward to getting back to production activities first. But I mean this is kind of a historic quarter for Avino, and it's the first time we've really been in a very comfortable cash position. We're looking forward to reinvesting in the mine, and we're just evaluating opportunities as they come in, right? There's a lot of activity in Mexico and a lot of projects that we always have our eye on. But at the same time, we don't want to make any hasty decisions. So we're...

And we're looking at improving recovery rates through automation.

Yes. We've got a lot of capital improvements we want to make first, and then we'll kind of sit back and take a 10,000-foot view of what's best for Avino and for our shareholders.

Okay. And so you're not looking at other—well, you're always looking— I guess, looking at other projects that might be in and around. But would your first choice be something that has some synergies with Avino or something a little bit different? And would it be more on the cash flowing side or the development side?

That's a tough question to answer. I think we're pretty agnostic as far as what we're looking at. We like exploration stories. We like past producing stories. There's a lot of stuff that we like. But at the same time, we're going to be very, very cautious with our funds. And we want—we are still focused on Mexico and we plan—at the very least, we plan to remain that way.

We want to find higher-grade material on our property. We want to lower our all-in sustaining costs back to where it was when we were mining San Gonzalo, which was around $10. So that's our goal.

Yes. That's the big focus is to get everything—we have a large mill circuit, and if we can find higher grade and run some of that material through our mill, we're pretty confident that costs will come down and we'll be in a much better position for the future.

Okay. No, that's great. It sounds like most of it's earmarked for current—unlocking the current potential at Avino.

Thanks, Matt.

Thank you, everyone, for taking the time to listen today. We appreciate the patience of all our stakeholders and look forward to resuming normal operations soon. We look forward to a productive second quarter and remainder of 2021. Thanks again for listening, and have a great day.

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