Santacruz Silver Mining Ltd. (SCZM) Q1 2026 Earnings Call Transcript

hi everyone thank you for joining us today we have santa cruz's q1 results webinar i am joined by ceo and executive chairman arturo christamo and cfo andres bedrigal management will start off with commentary on the quarter before getting into q a we may be making some forward-looking statements if you'd like to know more about those you can find them on the company's website and with that out of the way i'll turn it over to our trail to get us started Good morning, everyone, and thank you for joining us.

Q1 was a strong quarter for Santa Cruz, not only from a financial standpoint, but also in demonstrating the continued evolution and strengthening of our business platform. The quarter highlighted the advantages of our diversified multi-asset, multi-jurisdictional operational model, with silver and zinc as our core co-products and further supported by the stability and flexibility provided by our oil sourcing business. From an operating perspective, consolidated silver production was broadly stable compared with Q4, and zinc production remains above the prior year's quarter. the bolivar mine continue its recovery with silver production up in a meaningful way again quarter over quarter this time as you can see and with a 28 increase this last quarter caballo blanco remain our strongest and most profitable mine simapan also our highest high volume operation delivers strong gross profit during the quarter despite lower recoveries and head grades coming time in below budget. These results were primarily impacted by the intermittent operational disruption related to the power grid improvements carried out by the Comisión Federal de Electricidad in Mexico, Mexico's national power supplier, as well as limited access to Level 960 due to ventilation constraints in the areas. I am pleased to report that both situations were resolved by the end of this first quarter, and Q4 will be a more stable quarter for Simapan. Looking ahead, we remain highly focused on improving metal recoveries, particularly silver recoveries, which represent a meaningful opportunity to further enhance the mine's cash flow generation and overall profitability of the company. We're already seeing improvements in these areas during this second quarter in bolivia san lucas continued to play an important role in supporting the plant utilization absorbing some of the fixed cost and providing us with operational flexibility across all of our bolivian operations the operational flexibility we have achieved over the last several quarters is a strong testament of the resilience of santa smooth the asset multi-metal business model in today's environment of metal price volatility and operational and operational challenges sorry such as the recent water situation at the bolivar mine the diversification of our produce producing assets allows us to maintain stability and continuity throughout our operations as different operations are able to support one another when the performance of performance of or continuity of a single asset is temporarily impacted finally i would like to address the changes we implemented in our reporting format during the first quarter these enhancements were designed with a clear objective to provide investors with a more transparent detail detailed and intuitive view of our business we want stakeholders to better understand where value is being created where opportunities for improvement remain and how our operations are generating cash flow and long-term returns we believe the investment community will find this new format significantly more accessible meaningfully and aligned with the way sophisticated investors evaluate performance overall q1 was not only a strong quarter from a financial perspective but also an important milestone in reinforcing our commitment to our shareholders and the broader investment community the evolution of our disclosure standards reflect our focus on transparency accountability and continuous improvements in the way we communicate our results by providing more detail and easier to understand reporting We're giving investors better tools to evaluate the company's performance, identify the key drivers of our business, and clearly assess the areas where management remains focused on delivering further operational and financial improvements.

I hope this provides helpful context. with that i will now turn the call over to andres our cfo who will walk you through our first quarter financial performance and provide additional context and detail in the reporting framework thank you arturo um from a financial standpoint uh q1 was a very solid quarter for the company we haven't increased revenue increase 81 year over year to 127 million gross profit increased 54% to $43 million, operating income increased 53% year-over-year to $35 million, and net income increased 201% year-over-year to $29 million, and adjusted EBITDA increased 55% year-over-year to $43 million. So that's basically in terms of how our income statements had performed however if we look into the cash generation we close the quarter with approximately 65 million dollars in cash and highly liquid marketable securities this is particularly important when considered two temporary cash impacts during the quarter first in bolivia income tax for the prior fiscal year is paid in full during this first quarter so we paid approximately 32 million dollars for that tax that's normal in q in 2025 first quarter we did the same thing for the 2024 income tax expenses and then we also increase our inventory especially in our inventory which we expect to process and sell in future quarters both items temporary pressure cash but neither changes the underlying strength of our business on cost if we look at the income statement in aggregate cost increased year over year however i think it is important to separate two different facts and this is one of the reasons why we have enhanced our reporting framework during the quarter san lucas one was one of the largest contributors to revenue generation as it sold significant portion of its inventory as a result a meaningful portion of the the cost of sales came from san lucas as we all know san lucas is a margin-based or sourcing and processing business so if san lucas if sorry if metal prices abroad market prices increase the cost of buying that or to process it through our million facilities increase so it's an effect a normal effect of the san lucas operation and since this quarter costs have sorry san lucas portion of revenues have increased it's normal that cost increases in addition costs were also affected by the appreciation of the boliviano during the quarter which increases the us dollar reported costs when boliviano denominated costs are translated into dollars so far in the second quarter the boliviano has depreciated significantly which should reduce some of the translation pressure if current conditions continue. I think that is why the new reporting framework is important. We are presenting the mining operations separately from San Lucas, treating silver and zinc as co-products and showing realized price, all in sustaining costs, realized margins by metal, which gives investors a clearer view of the actual economic of Santa Cruz's business model and helps separate market-driven effects, such as, for example, metal prices, foreign exchange, etc., from the actual operating drivers. Now, from our balance sheet, I think it remains very strong. At quarter end, we have approximately $65 million in cash and marketable securities. We have working capital of around $76 million and a net cash positive position if we exclude the CDRs. And that's important because they are contingent value rights and they are more an accounting related matter. So we are cash positive. No, we are not net debt. We are net cash. Overall, the company is in a stronger financial position and our priority is to convert that strength in to sustain operating improvement, discipline, capital allocation, and long-term growth. That will be all like our summary of the Q1 2026.

Well, thank you so much, Arturo Ndreus. And of course, congratulations on another successful quarter. Let's move on to the Q&A now. So the first question I have is for Arturo. At a high level, how would you characterize Santa Cruz's operating performance in Q1 2026?

And what did the quarter show about your company's broader business model sure like well considering a stable production across our minds and with bolivar silver production increasing 28 percent quarter over quarter again a second quarter where silver production it increased at bolivar as the watering process advances uh well on as planned and also with the caballo blanco and the simapan delivering consistent production output the company's strategy of geographic metal diversification combined with discipline operational execution help us take advantage of today's strong silver prices i would like to say that the company is well positioned to take advantage of the strong metal price environment having said this i would like to say it as well that the first quarter is a consolidation of our strategy where we are seeing now the capabilities of our assets as cash flow generations q1 should be characterized as a financial solid and a consistent performing water it was not acquired a quarter defined by record-breaking production volumes silver output was actually down 16 year over year because of the prior uh year quarter in q1 2025 I mean, when we compare to that quarter, and preceded by the May 2025 Bolivar flooding event, no? So instead, it was a quarter that was defined more for, let's say, pre-current, concurrent facts, no? Operational recovery at Bolivar, steady consolidation output across the remaining four operations, demonstrating the resilience of the diversified asset-based, exceptional financial conversion of that steady output into record revenues, profitability, and a balance sheet strength again for another quarter. this quarter uh demonstrates uh the underlying earning power of santa cruz asset based with a consolidated production of 1.3 million ounces of silver and more than 21 000 tons of sinks sink sorry translating into a record financial performance when operating operational recovery at bolivar advances and progress uh according to plan i will characterize q1 as a strong quarter that also shows the value of our portfolio and the structure as they complement each other. The important point, I think, is that the different parts of the portfolio contribute in different ways. Bolivar continues its recovery. Caballo Blanco continues to be our most efficient operation. Simapan generates a strong gross profit and remains our highest volume operation, with significant upside if we improve recoveries and concentrate qualities as we're seeing now in this second quarter. And San Lucas, from a tangible point of view, provides us with healthy margins and solid cash flows, while in a less tangible way, absorbs certain fixed costs across our Bolivian milling facilities, which gives us a significant operational flexibility across our Bolivian assets taking all these together our multi-assets multi-metal and multi-jurisdiction platform combined with the added flexibility of our or sourcing business represents a defining strength of sanacruz operating model this diversification not only enhance our resilience in volatile market conditions but also provides greater operational flexibility stronger cash flow stability and a more balanced risk profile, positioning the company to create sustainable long-term value for our shareholders, Olenka. So I feel it was a solid quarter in many ways.

Thank you, Arturo. Now, Andreas, why did Santa Cruz update its non-GAAP reporting framework this quarter? How should investors use a new presentation to evaluate performance?

Thank you, Olenka. I think that's a very good question. Look, the reporting update was made because of two reasons. First, it was to make sure that Santa Cruz business model is easier to understand now. And second, to better show the strength of that model. We believe Santa Cruz has a unique operating platform, Olenka. It allows us to benefit from stronger metal prices, but it also provide us flexibility during periods of market volatility the key point is that our model is built around optimizing the value of our assets we know that the san lucas is a strategic for us because it helps us keep our mini facilities running a hundred percent so we are maximizing plant utilization and we are using both mining operation and all sourcing business to support margin generation. In the past, Olenka, Santa Cruz presented its production and operating performance primarily on a consolidated silver equivalent ounces basis. That metric was useful for comparability when prices were kind of stable, you know. However, given the volatility in silver and zinc prices over the last two quarters and specific characteristic of our business model we felt it was important to provide investors with a more granular information under the underlying economics of the business under the updated framework we are presenting silver and zinc as a co-products remember that our minds are very rich in both metals and we are using actual actual payable silver ounces and zinc ounces and comparing realize silver prices with all in sustaining costs to show realized margin which is the most important thing right now we are also presenting the mining operation separately from san lucas because the economics of the two business are different in the mining operations we extract and as we are not and process all from our own mineral properties in san lucas we purchase a third-party org based on its content mental value and process it through our existing plants as a result San Lucas can generate meaningful absolute margin margins and it helped us with the plant utilization reducing some fixed cost etc however its gross margin percentage will naturally be less than a traditional mining operation like Simapan, Caballo Blanco, Bolivar, or Porco. So I believe, Olenka, that our new reporting framework should help investors to understand the business in a more practical way, where they know where margins are generated, how silver and zinc contribute to performance, and how costs, that's important, are allocated, and which drivers are external like metal prices and foreign exchange versus operational such as grades, recoveries, costs and capital investment. So this is not simply about providing more data to our investors community. It is about giving investors a clearer and more accurate view of how Santa Cruz creates value. Got it.

Thank you, Andreas.

That's really helpful. now touching on boliviar arturo can you provide on the boliviar an update on boliviar recovery plan including progress toward higher grade areas and the steps taken to reduce the risk of similar interruptions absolutely olenca well our bolivar mind the recoveries continue to move in the right direction we were definitely very focused in getting this mind back on track and full production no q1 as we can see bolivar increased silver production for around 28 when compared to the previous quarter and also head grades increase they improve an increase from 108 grams per ton to 141 grams per ton this is because of the addition of more areas from pomabamba and ane veins which are the ones affected by this excess water this shows a clear operational improvement. Although the year-over-year Bolivar is still below the level it was producing before 2025, prior to the water inflow event, but we're showing a clear path to recovery, and we expect hopeful recovery still to be reached by the end of Q3, beginnings of or mid 2024. The work is now focused on recovering access to the affected areas to reinforcing and advancing developments at these affected areas and bringing higher grade zones back into our bolivian mine plan during this year first and foremost for us is the safety of our miners so this is uh something that we uh it always plays a role into the the efficiency or how we recoup some of the areas no but we're well advanced in the in the process and in these areas high grade areas i mean the pongabamba and nanem are beginning to contribute more and more into the mine production we should expect silver contents to further improve together with the mine profitability as better operating margins are experienced we have also reinforced the technical risk response around the operations We're carrying out hydrological, I always have a hard time with this word, hydrogeological works which are done by a very reputable specialized consultant team out of Mexico. We have also increased the pumping and the watering system and the capacity for more than 500 liters per second. That's a significant amount. And we have reinforced our water treatment infrastructure so that the water coming out from the mine can be managed more efficiently before it's added into our processing circuit. In conclusion, the Bolivar mine is becoming technically a stronger and a more productive mine as days go by, as a result, of course, of all the work and the engineering that it's been built around the mine. so q1 was another step in that recovery and we remain focused in returning bolivar mine to full production by q4 2026. perfect well that's great to hear now looking at mexico i have another question for you arturo zimipan generated strong gross profit this quarter despite lower recoveries and grades why is zimipan such an important opportunity for santa cruz in

2026?

That's a good question, Aleka. Well, definitely Simapan is a big volume, high volume mine. Simapan presents one of the most important opportunities of improvement in our portfolio of assets this year, together with the recovering of the Bolivian high trade areas of Poma Bamba and Ane. And the reason why Simapan is so important is our highest volume operation, processing approximately 220,000 tons in Q1 and generating around $38 million in revenues and $19 million in gross profit. That is a strong contribution, especially considering that recoveries were lower during the quarter. And this is why we see Simapan as an opportunity. It is a large operation with meaningful silver exposure. In Q1, it generates a strong margin contribution from silver of approximately $42 per ounce. If we improve recoveries production performance, quality concentrates, and the overall metallurgical recoveries in Simapan, the financial impact will be meaningful. Our focus in 2026 is to translate the capital already invested into measurable operating improvements at Simapan. that means better milling facility performance stronger and better improved recoveries and an improved quality of the of the concentrate know that that will allow us to have a better financial performance at simapan we do not want to overstate the timing quarter over quarter because of the methodology improvements these are built throughout the execution by testing and by consistency but simapan mental recoveries is clearly on the right path and management is very focused at the moment to build and improve the recoveries at simapan we will remain focused on taking this mine and its milling operations to its highest achievable productivity levels and we will see improvements already in in the second quarter so that's why simaphan is it's so important for us i think perfect thank you arturo now touching on margins andreas i have a question for you silver margins expanded significantly in q1 while zinc margins narrowed how should investors interpret the cost allocation between silver and zinc and the margin performance by metal excellent thank you link and i think this is a very

important question in order to understand how we our reporting platform now it's it's updated on cost allocation olenka the practical point is simple our minds are poly metallic so silver zinc lead copper come from the same ore that is why this co-product methodology that we're using now allocates costs based on each operation production profile and metal efficiency not simply based on metal prices if i mine as an example if a mine is more efficient and producing silver silver will generally show a stronger cost profile if a mine is more zinc oriented sing will generally show the stronger cost profile uh caballo blanco uh are good examples so so the investors community can understand caballo blanco a caballo blanco silver is the strongest margin driver for example in q1 2026 the realized silver price was around 66 dollars per ounce i'm going to explain later about the the average realized price however the only sustaining cost was only 23 per ounce generating a silver margin of around forty three dollars sink was also profitable for caballo blanco but the margin profile was less strong because we only got a margin of one thousand dollars but look what i'm trying to to explain here for example with porco the the shows the opposite profile you know porco is more a sink oriented mine so porco gets better margins uh in terms of zinc and it's and not in terms of silver and why is that you know um let's imagine we have two big rocks and in one rock we have one ton of zinc and only 50 ounces of silver. But in the other rock we have the same ton of zinc but 100 ounces of silver. Of course, the cost is to treat that rock but if you are getting more ounces for that rock, your costs are less to get that silver. So the point is not that one mine is better than the other. The point is that each mine has a different metal profile. In this case, Caballo Blanco generates a stronger margin from silver while porco generates stronger margins for zinc that's the reality of the mines itself that is exactly why we why the new format is useful it gives investors more granular information to understand each operation and each metal instead of relying only on one silver equivalent number investors can now see more clearly which operations are driving silver margins and which are driving zinc margins and what is really contributing to profitability across portfolio now olenka if investors go to our mdna they can know which operations are more silver oriented more sink oriented where are we getting the margins and i think that's the important thing we're presenting more information to our investors community and they now can ask and focus on the on what they want to focus especially if they are more inclined to silver or more inclined to sink that is why we have done this got it thank you andreas now moving on to san lucas arturo how should investors think about the strategic role and long-term margin profile of san lucas within santa cruz's portfolio good point to link a good question well san lucas should be viewed as a strategic component of our business no given

the nature of its operations it is fundamentally a margin driven business and should not be evaluated or measured as a traditional mining operation the company let's remember that the company purchased ore from third party small miners generally speaking primarily and and we process it through our milling facilities because this ore is acquired based on metal content content that price prices generally linked to prevailing market prices the san lucas business operates primarily with a margin-based model as a result during periods of significant higher metal prices such as the recent increase in silver prices san lucas margins as a percentage tend to remain within a relative consistent range unlike mining operations for the full benefit of higher silver prices reflect directly in our operating margins however when considering additional factors such as fixed cost absorption operational flexibility and increased plant utilizations by san lucas it continues to provide meaningful um value to the overall business no that's why san lucas is so so important and very interesting as our business model in q1 san lucas process approximately 95 000 tons increasing nine percent year over year it produced approximately 341 000 ounces of silver and 7 000 tons of zinc both higher than q1 last year it generates 50 million dollars in revenues and $8 million in gross profit. So its contribution is meaningful, even though margins were lower when compared to Q1 2025, mainly in this case due to the appreciation of the Bolivian currency. Strategically, San Lucas helped us keep our milling facilities utilized and running at design efficiencies. It also helped us by absorbing some fixed costs, providing also ore sourcing optionality to our milling facilities and gives us a broader view of the local mining ecosystem which in Bolivia is very very important. Overall San Lucas provides us with a very unique business model and flexibility to our operations across all of our Bolivian assets. So investors should not compare San Lucas directly with the mining segment or a gross margin operation it should be evaluated on absolute margin contribution plant utilization and its role in supporting the broader operating model of the company this is why we segmented this business and we presented as a margin business such as it is no i think that's uh that's what son lucas uh today uh represents for us as a company you know it's it's a it's an important and strategic business and company for us yes i agree thank you arturo

and i have a question for you andreas q1 revenue adjusted ebitda and net income increased significantly year over year what were the main drivers and how sustainable are current margins if metal prices normalized thank you yes that was definitely strong quality no but the latest driver was definitely the silver price now but i think it is important to put that in context q1 was a very strong quarter year over year revenue increased 81 to we have said to 120 in 27 millions ebda increased 55 net income increased 201 etc but that said we believe the quarter could have been even stronger Olenca. Remember that Bolivar was still in the process of recovering access to the higher grade silver areas. So if we are able to recover those areas, we will be getting twice as we are getting now for San Lucas. In Q1 we have seen as Arturo was mentioning, we have seen clear improvements versus Q4 last quarter but we're still down from prior year before the water inflow event and again CIMAPAN as Arturo was mentioning is another important point here is one of our largest volume operation and has meaningful serious closure we have seen that by the gross profit it generated this quarter and that was even with lower production than Q1 2025 a lower head grade so imagine what we can do if we are able to increase the recoveries there and the production. So I think while Q1 was a strong quarter compared to last year, we don't see the result only as a price-driven outcome. We also see it as opportunity for Bolivar to continue the recovery. Simapan improves silver production and recovery profile. Yeah. On margin, as the question was asking, on margin sustainability, we're realistic. If metal prices normalize, margins will naturally compress like in any other company. But our strategy is not based on assuming higher prices, Olenka. The focus is to increase and improve the quality of our production as like in Simapan. And remember that we did that in Caballo Blanco in Q3 2024. We increased the recoveries, we brought more silver into the lead concentrate, et cetera. We also, you know, I think that the focus to increase the quality of the production as well, optimizing cost and keep using the flexibility of our platform with San Lucas. And that includes not only our mining operations, but also the margin-based contribution on absolute margins that San Lucas brings to the table. So, the simple question, Olenka, is, yes, silver prices were very important driver in Q1, but the long-term margin opportunity, it's operationally. You know, if we can continue improving Bolivar, execute the recovery or metallurgical work in Simapan, and maintain discipline across the portfolio, we believe the business is well positioned to generate strong margins across different price environments. And I think that's what Santa Cruz brings to the table, Olenka. Our business model is unique. I think we have, as Arturo was mentioning, diversify as a base. We have different methods of production. We have a multi-poly metallic company. so we are able to um you know to to keep performing or if the prices go down and of course if the price is increased we can leverage on our platform so yes i believe that's that's the main reason that we believe that we can continue with this margin solenka got it thank you and i have another question for you andreas operating cash flow before working capital was strong but cash conversion was affected by taxes and working capital which investors understand about the q1 cash flow profile oh thank you for this question i think it was important to to to uh you know spit to investors about it the key the key point is that the underlying operating cash generation was strong but q1 included not some taxes which is where normal is a tax seasonality i'm explaining why as we have seen the operation cash flow before non-cash working capital was around 48 million dollars compared against 14 million in q1 last year that reflects clearly the stronger earnings profile of the business however we paid around 32 million dollars in taxes because bolivia has a first quarter cash payment cycle. Corporate income taxes for the full year are paid in the first quarter of the following year. So the Q1 2026 payment relates primarily to the 2025 fiscal year that we pay the whole taxes for the 2025. And this is consistent with what investors saw in Q1 2025, when taxes related to the 2024 fiscal year were paid. So it's basically a timing matter like it's not that we are paying these taxes every every quarter so from a cash flow perspective we are encouraged by the operating cash flow that's that's we have said that we have basically 48 million dollars of operating cash flow but the focus for the rest of the year is keep converting earnings into cash while managing taxes receivables inventory and capital spending carefully. We have spent some CAPEX this quarter to improve both the Bolivian operations and the Mexican operations. We believe that those investments, at least in Mexico, are going to be less from now on because we have invested a lot in terms of milling facilities and equipment. Yes, it was underground equipment that's correct however i think the the most important issue here is that we have also increased our inventory both in terms of supplies and ore and that is because we are always focused on having in terms of risk the business continuity and i believe at this point it was important in bolivia to increase our inventories both in supply and on mineral so yeah we are basically good with that. I know that affects sometimes the castle, but we don't feel that we have any restraints there. And we will be building cast from Q2, Q3, and Q4.

Perfect. Thank you, Andreas. Now, touching on Bolivia, Arturo, how is Santa Cruz managing the current operating environment in Bolivia, including fuel availability, logistics, social unrest, and concentrate transportation?

Sure, Olenka. That's an interesting question, more so nowadays. Well, after the safety of our miners, first of all, the business continuity is a major area of focus for us, especially in Bolivia. I will answer this from an operational level first and then move to a broader context in the country. From an operational standpoint, point the most important thing is that our operations are currently running normally to date we have not experienced any material disruptions from recent protests or social conflicts in Bolivia with regards of logistics we're also operating normally the majority of our concentrates are ported by railroad by trade and we have not seen any material disruptions as well in the in the concentrate uh achievements uh or exports uh so far so uh the issue we're seeing in bolivia today are more localized mainly in certain areas such as la paz and cochabamba they appear to be more political in nature importantly the private mining sector and the mining cooperatives cooperatives have have not joined this conflict and in any way that affects our operations in fact the mining groups have just recently continued engaging with the government and they have agreed now or have agreements now being reached to maintain stability in the sector so for us for santa cruz especially we manage this type of environments through our business continuity and risk management approach we maintain inventories and operational flexibility that allows us to continue working normally even if they are short-term disruptions in parts of the country. We also monitor logistics, fuel availability, concentrate transportation, of course, and every site level conditions are monitored literally every hour. So we feel strong about it and uh we don't we don't foresee any disruptions just on the to mention some uh availability on on the field as well we are uh permitted and we were one of the first companies to be allowed to make fuel imports into the country so we can import our fuel our diesel and for our usage no so that gives us a lot of control over the diesel requirements from our minds arturo if you allow me i think it is important to understand that at the macro level mining has become

increasingly important for bolivia yes i don't know if you know this but today mineral exports represent a very significant portion of the country export base we are around 75 percent of the export are coming from the mining sector so the the mining sector is not just a let me to say just a sector of the economy right now it is strategically important for the country's violence of payments and foreign currency generation so for that reason we believe that there is a strong incentive from the government, mining companies, cooperatives and other participants to protect the continuity of mineral production and exports. Of course we remain cautious and continue to monitor the situation closely but as today Santa Cruz and our Bolivian operation has not been affected and we do not currently expect this situation to disrupt our operating plants so we believe and we are very um you know optimistic about what is going to happen here remember that we are speaking we're talking about uh some you know some and some uh sectors that have lost power and they were running this country for 20 years and it's normal to now the shift of power has changed but we believe it's in a positive manner i think the president Rodrigo Paz is getting a lot of support from the people here because this eruption, there has been some violence in it, so the broader community are not supporting this. So, we believe that in a couple of weeks this will normalize and we will continue the operations, and we are with operations regularly because Potosí and Oruro have not been affected and as we said before our risk profile is always to focus on business continuity so we have inventory enough to to keep producing at least for the next couple of months without any interruption and we don't think we don't expect anything else yeah the ones that Sandres points out Olenca the ones that the recent uh movements uh they are not generally uh from the communities or the or the citizens

in general they are just specific and areas and um with the with with with very pinpointed uh interest so generally speaking i think the country is is is solid and uh mr rodrigo has reached a very good agreement with the mining uh uh community so we don't foresee any problems yep okay got it that's very good to hear now andreas average realized silver prices per ounce sold this quarter were lower than many silver focus peers can you explain the main reasons for this difference yes of course and i think we have got a lot of questions about about it and it is

important to to explain why the main reason olenca is methodology average realized price brown sold is a non-gap measure so it is not calculated exactly the same way across all companies based on what we have seen several of these silver focus peers appear to calculate realize silver price using gross revenue as the starting point our methodology is more conservative We start from revenue after metallurgical deductions and then adjust only for some refining costs. That make our reported average silver price look lower than some peers, even when underlying market price exposure is similar. So the difference, Solenka, is not necessarily that we are realizing lower silver price commercially. A large part of the difference is simply how the non-GAAP measure is calculated and presented. So, if we calculate the metric using gross revenue, our prices will be more consistent with the way some peers appear to present it. Our average real price, it will be much closer to those peers. So, since we have received several questions, and we are always trying to get more information about our financials, our production, et cetera, we are reviewing the presentation of this metric going forward the objective will be to make sure that we are measured comparable with our peers while still being transparent about deduction refining cost and the economics of selling concentrate so basically Olenka it was it is a methodology and we have always done that maybe it was too conservative but we are we have been discussing this with Arturo Eduardo our ceo and i think we'll try to to do the same way as our peers but believe it's not it's not it's nothing at all it's not out of the blue you know it's something normal we are just more conservative in how we're presenting okay got it thank you and another question for you andreas how did the appreciation of the boliviano effect report a cost and vat receivables in q1 and how How should investors think about those effects going forward? Thank you. The Boliviano had a significant effect on Q1, both on reported costs and on the US dollar value of our VAT. On cost, the key point is that approximately 85% of our Bolivian cost base is in local currency. So during Q1, the Boliviano has appreciated significantly. It was around 28% Ollenka compared with Q1 2025. So even if the underlying local currency cost structure is relatively stable, those costs translate into higher US dollar amount when the Bolivianos strengthens. So that was an important factor in the year-over-year increase in reported costs. That is why we think it is important for investors to separate the underlying operating cost performance from the foreign exchange translation effect. The appreciation of the Boliviano increased our reported US dollar cost, but that does not necessarily mean that the operation become less efficient on local current basis. On the bad part, the same effect has happened because it is not that we are not collecting that. It is only that since the BAT is, we are collecting that in Bolivianos, when the Boliviano appreciates, the BAT also gets more value in our balance sheet. So the increases investors see in our balance sheet is driven primarily by the stronger Boliviano, not a deterioration in the recoverability. In fact, Olenka, from a collection perspective, we have been recovering DAT more quickly than in prior periods. So we would not view the higher US dollar balance as a negative operating signal. It is largely a currency translation effect on a local currency asset. And maybe something about Q2, you know, looking forward, the Boliviano has depreciated approximately 18% and is trading now closer to 10 Bolivianos per dollar, and we believe that a level better reflects the broader economic reality in Bolivia. If this trend continues, the translation effect in Q2 should be different from what we have saw in Q1, meaning lower costs. So another thing for investors, you know, and that's because we're working in these countries, there is no practical hedging market for the Boliviano, so we cannot materially hedge that exposure. What we can do is manage the business operationally, maintain cost discipline, improve productivity, and where appropriate, align certain local currency obligations with local currency cash flow. That's basically it, Olenka.

Perfect. Thank you, Andreas. And I have a question for you, Arturo. Looking ahead, what are the main operational and strategic milestones investors should watch out for in 2026, including Sorakaya?

Good point. Good question. Well, first, Bolivar, we want to continue recovering and restore the access to the affected areas of Bolivar, Pomabamba and Naneveen, and bring this operation back to full production during this year. This remains a key operational priority for us. Second, it's also Simapan. This is also an important objective as it is our highest volume operation, as we mentioned before and it has a significant silver exposure we have opportunities there to keep working on the methodology and recoveries and with that we will keep organically growing its production and its profitability so that's a very important objective for us as well in third caballo blanco and san lucas at caballo blanco the objective is to preserve and keep a continues focused on efficiencies to maintain these mines as strong and as profitable as cities today and always looking for areas of opportunity. And with regards of San Lucas, the objective is to continue leveraging on its infrastructure and the logistics capabilities to support the outsourcing and maximize the plant utilizations across all of our Bolivian assets, absorbing at the same time some of the fixed costs and guaranteeing uh also the operational flexibility that bolivar uh sorry that san lucas provides to to all of our minds in in bolivia finally in sorakaya our organic growth and and next mine uh to be built uh the work is in progress that we're advancing with the permits we are very focused in getting these permits on time and we are still uh very positive that will be will be delivering and will be there with all permits on hand uh before uh in around august this year we're also working to verify and to bring to 43 101 standards all the resource the the mine we're working uh as well right now with the underground maintenance and uh and and and some blood models and mining plans uh for to design the best mining approach for this for this asset so we continue being uh or viewing sorakaya as an important organic growth opportunity for us the objective remains to position the project for initial production by the end of this year, of course, subject to completing the technical permitting and operating steps. So I guess 2026 should be resumed as a year of execution. We should execute in recovering the Bolivar high-grade areas, operational improvements at CIMAPAN, disciplined capital deployment, as Andres points out minutes ago and advancing the organic growth from Sorakaia as we maintain a strong and healthy balance sheet. We keep our eyes open, of course, to M&A initiatives and ideas that bring value to our shareholders and that's pretty much our objective for this year, Olenka. perfect thank you arturo yes question for you following the repayment of the major glencur obligation and the stronger treasury position how is management thinking about liquidity and capital allocation yes of course um i think it's very clear that our balance sheet is much stronger in a much stronger position but it was a year ago no doubt and capital allocation has to remain

discipline that's the most important thing our first priority is to protect and improve the operating base as arturo was mentioning that includes recovery work at bolivar metallurgical and recovery improvements at simapang and sustaining the performance of caballo blanco and san lucas that's our first priority our second priority is internal growth but it was mentioned in sorakaya where we see a potential attractive opportunity to increase our silver exposure. Remember that Sorakaia is a silver-oriented mine. Our third priority will be to maintain financial flexibility because we all know that the mining business is cyclical. We want to have the ability to make decisions from a position of strength. That's our priority, Olenka. As Satura was mentioning, we will also provide internal growth opportunities, but selectively we are not interested in growth for its own sake any capital deployment needs to complete compete against our internal opportunities and need to make sense of the for the shareholders so basically yes this is to to keep being responsible of our of our financial and capital expenditures thanks so much andreas um we're running out of time so we just have time for one more question today um arturo can you provide an update on the tsx mainboard graduation process and the status of the share buyback program i'm glad that you brought uh that uh that point that

question alenka well the the tsx mainboard graduation is a is an important corporate objective for for us this is advancing well we should complete this process and be uplisted now in june um assuming the remaining administrative and regular regulatory steps go as as expected uh we don't foresee any any problems uh we're working closely with our legal counsel and uh and um in the tsx authority so we we should be there by by june and as for the chair buyback program our view is that santa cruz chairs are definitely undervalued by any metric that you want to measure it and and currently uh current market levels could uh represent an attractive opportunity to execute this program you know at the same time capital a capital allocation for us needs to be as andres points out very disciplined so right now we're focused on completing key investments in our operations continuing the tsx main board graduation process and maintaining the financial flexibility we have built the buyback will be analyzed as part of the broader capital allocation framework uh general view and the potential implementation of a chair buyback program will be evaluated evaluated sorry following the completion of our tsx up listing process in the assessment of this opportunity we will carefully consider our planned capex investments our cash accumulation objectives and overall market conditions uh with the focus of repurchasing chairs at an attractive valuation levels as today might be no so definitely it's um it's within our uh list of uh to do things and um we'll keep advancing in in this process and we'll be moving along once we graduate the company to the big board perfect well thank you

so much aturo and andreas for your time today and congratulations on another solid quarter is there anything else you guys like to cover today i think it is important to say to the investors community that remember we are a very boost on the ground management and we will be always protect in our minds we have done very important investments in our operations and we believe this 2026 will reap the profits of it so yeah just thank you for the support that we have always got from our investors and that we will be working for them perfect and if anyone has any additional questions um you can just email me directly at olenca at cab.ca thank you so much

everyone who joined today and I hope you have a great afternoon.

Thank you, Lenka. Thanks for having us.