Andean Precious Metals Reports Q3 2023 Results

2023-11-30

TSX - Toronto Stock Exchange · Silver · Gold · Copper · Zinc · Lead · Canada

Company continues to pivot Bolivian operations into a processing facility focused on securing long-term material purchasing contracts, driving margins and cash flow

Toronto, Ontario--(Newsfile Corp. - November 29, 2023) - Andean Precious Metals Corp. (TSXV: APM) (OTCQX: ANPMF) ("Andean" or the "Company") reported its operating highlights and unaudited condensed interim financial results for the three and nine months ended September 30, 2023. All amounts are expressed in United States dollars, unless otherwise noted (C$ refers to Canadian dollars). This news release should be read together with Andean's management discussion and analysis ("MD&A") and condensed interim consolidated financial statements for the three and nine months ended September 30, 2023 (the "Financials"), which are available under the Company's profile on SEDAR+ (www.sedarplus.ca).

"This has been a transformative period for Andean. In September, we announced our exclusive agreement with Silver Elephant to purchase up to 800,000 tonnes of oxide material from its Paca Silver Project," stated Alberto Morales, Andean's Executive Chairman and Chief Executive Officer.

Mr. Morales added, "Earlier this week, we shared the exciting news of our acquisition of Golden Queen Mining, LLC, which operates Soledad Mountain mine, strengthening our position as a larger, more robust, and better diversified precious metals producer while maintaining our strong liquid asset position. From the outset of 2023 we've been clear about our objectives: extend the life of our Bolivian operations and grow our Company through acquisitions in the Americas. We have now achieved both objectives."

As part of Andean's strategy to grow while improving margins and cash flow, the Company is making strategic adjustments to optimize production in Bolivia and at Soledad Mountain in California. In January 2024, Andean will release an updated NI 43-101 reserve and resource estimate for Soledad Mountain. This will be followed by a new mine plan, changes in the ore control process as well as production and cost improvements. Meanwhile, at San Bartolomé, the transition from a conventional mining operation is near complete, with the majority of ounces produced arising from third party feedstock. By mid-2024, Andean anticipates that production from the fines disposal facility ("FDF"), together with third-party oxide material, will replace the low-grade and high-cost tonnage from Pallacos.

Q3 2023 Highlights

The Company produced approximately 1.2 million silver equivalent ounces ("Ag Eq oz")1, an increase of 2% compared to Q2 2023. The average head grade and recoveries were 128 g/t Ag and 76% compared to 119 g/t Ag and 79% in Q2 2023. Based on 3.5 million ounces of silver equivalent production to date, and expected production for the remainder of the year, the Company is decreasing its 2023 silver equivalent production guidance range to between 4.6 and 4.8 million ounces.

Total revenue of $38.2 million, based on sales of 1.6 million Ag Eq oz at an average realized price of $24.34 per ounce, compared with Q2 2023 total revenue of $15.3 million from the sales of 0.6 million Ag Eq oz at an average realized price of $24.65 per ounce. The total revenue increase of 150%, or $22.9 million, is due to the inclusion of 540,000 Ag Eq oz classified as inventory as at the end of Q2 2023 as well as an increase in production.

As of September 30, 2023, delayed sales of approximately 233,000 Ag Eq oz were valued at $4.6 million and classified as inventory. Subsequent to September 30, 2023, the bullion was sold for a total of $5.4 million based on an average realized silver price of $23.46 per ounce.

In Q3 2023, cost of sales was $30.9 million, an increase of 162%, when compared to Q2 2023, mainly due to the recognition of costs associated with 540,000 Ag Eq oz classified as inventory in Q2 2023 and sold in Q3 2023.

General and administrative expenses of $2.7 million were $0.4 million lower than Q2 2023 and an $0.8 million improvement over Q3 2022. The decrease over Q2 2023 was largely due to lower share-based compensation expenses and management fees.

For Q3 2023 and Q2 2023, reported income from mine operations was $6.3 million and $2.4 million, respectively. In Q3 2023, the Company reported net income of $0.1 million compared to net income of $0.2 million in Q2 2023.

Earnings before interest, taxes, depreciation and amortization ("EBITDA")2and adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA")2 improved to $4.3 million and $6.8 million, respectively, compared with $3.7 million and $4.9 million in Q2 2023. The increase over Q2 2023 was largely due to higher revenues, lower exploration and evaluation costs and general and administration costs, partially offset by higher operating expenses.

Operating cash costs ("OCC")2per ounce of silver produced, net of by-product credits, was $19.39, an increase of 1% over Q2 2023 primarily due to higher oxide material purchasing costs.

All-in sustaining costs ("AISC")2per silver ounce sold, net of by-product credits was $21.28, a decrease of 10% when compared to Q2 2023. Based on the Company's nine-month AISC of $22.60 per ounce sold, it is increasing its AISC guidance for 2023 to between $22.50 and $22.90 per silver ounce sold.

Positive net working capital of $86.1 million as of September 30, 2023, including liquid assets of $88.1 million. Liquid assets were comprised of $76.8 million in cash, silver bullion of $6.3 million, marketable securities of $4.3 million and VAT certificates receivable of $1.5 million. Liquid assets were $91.8 million as at December 31, 2022.

Pursuant to its normal course issuer bid ("NCIB"), in Q3 2023 the Company repurchased and cancelled 780,500 shares at an average purchase price of C$0.74 per share for a total of $0.4 million (C$0.6 million). Since the inception of the NCIB in the fall of 2022, a total of 3,160,100 shares at an average purchase price of C$0.79 have been repurchased and cancelled for a total of $1.9 million (C$2.5 million).

Civil construction and procurement of the equipment required for the silver recovery project at the Company's FDF is progressing as scheduled. Delivery of the equipment has commenced and is ongoing. Commissioning and commencement of production is targeted for the first half of 2024.

The Company signed an exclusive five-year agreement to purchase up to 800,000 tonnes of oxide material from the Paca silver project in Bolivia. Paca is an undeveloped, epithermal silver and base metal deposit in Bolivia located less than 200 km southwest of Andean's San Bartolomé mine and processing facilities near Potosí.

Environment, Social and Governance Summary Performance

Health and safety

Lost time injury frequency rate ("LTIFR")3 was zero during Q3 2023 and the Company achieved a significant safety milestone of approximately 514 days with no lost time injuries ("LTI"). One of the Company's goals is to maintain a safe and healthy working environment for all, with a strong safety culture where everyone is continually reminded of the importance of keeping themselves and their colleagues healthy and injury-free.

The Company is committed to have all employees and contractors return home safe every day. Regular safety awareness campaigns are conducted through external training consultants for all personnel.

Environment

Water management & tailings dams management: In Q3 2023, water consumption at San Bartolomé was 51% compared to 53% in Q2 2023. The reduction in water consumption was achieved by reusing 100% of water from the tailings dam, 47% water from the wastewater treatment plant or rainwater collection and 2% fresh water for office and food services. Monthly external monitoring was conducted on water and sediment for surrounding lagoons. Piezometers and environmental wells are externally and internally monitored as part of the Company's water management.

Climate action: Manquiri carries out the inventory of its greenhouse gas emissions for scopes 1, 2 and 3. For scopes 1 and 2, objectives are in place with a goal to be carbon neutral. Emissions monitoring in the refinery and waste incinerator are conducted monthly to ensure clean air.

Environmental incidents rate: The reportable environmental incidents rate remained at zero in the third quarter and year-to-date.

Community

Year to date, donations, medical support, and infrastructure investments were provided to local communities, including:

11 new homes were delivered to the Chalviri Baja and Phusuta communities to provide housing for families in dire need of accommodation.

Teachers and students of the Chalviri Educational Unit continued to receive training through workshops and seminars.

The Company participated in several community development initiatives, including providing water purification materials for the Escuela Robertito community and 118 children who live and receive education on the slopes of Cerro Rico.

Summary of Operating and Financial Results

Operating Results Summary

| | | | Q3 | | | Q2 | | | | | | Q3 | | | Q3 | | | | | | YTD | | | YTD | | | | | | Units | | 2023 | | | 2023 | | | Change | | | 2023 | | | 2022 | | | Change | | | 2023 | | | 2022 | | | Change | | | | Tonnes mined(1) | k dmt | | 390 | | | 468 | | | (17%) | | | 390 | | | 436 | | | (10%) | | | 1,291 | | | 1,455 | | | (11%) | | | Average ROM mined ore grade | Ag g/t | | 42 | | | 43 | | | (2%) | | | 42 | | | 56 | | | (25%) | | | 46 | | | 60 | | | (23%) | | | Average +8 mined ore grade | Ag g/t | | 78 | | | 75 | | | 4% | | | 78 | | | 94 | | | (18%) | | | 74 | | | 98 | | | (24%) | | | Tonnes purchased(2) | k dmt | | 208 | | | 167 | | | 25% | | | 208 | | | 113 | | | 85% | | | 464 | | | 347 | | | 34% | | | Average purchased grade | Ag g/t | | 179 | | | 186 | | | (4%) | | | 179 | | | 230 | | | (22%) | | | 188 | | | 221 | | | (15%) | | | Tonnes milled(3) | k dmt | | 384 | | | 385 | | | 0% | | | 384 | | | 404 | | | (5%) | | | 1,144 | | | 1,217 | | | (6%) | | | Daily average throughput | dmt | | 4,474 | | | 4,561 | | | (2%) | | | 4,474 | | | 4,590 | | | (3%) | | | 4,499 | | | 4,625 | | | (3%) | | | Average head grade | Ag g/t | | 128 | | | 119 | | | 8% | | | 128 | | | 115 | | | 11% | | | 118 | | | 119 | | | (1%) | | | Silver recovery | % | | 76 | | | 79 | | | (3%) | | | 76 | | | 77 | | | (1%) | | | 78 | | | 77 | | | 2% | | | Silver production | k oz | | 1,190 | | | 1,189 | | | 0% | | | 1,190 | | | 1,168 | | | 2% | | | 3,357 | | | 3,555 | | | (6%) | | | Gold production | oz | | 640 | | | 396 | | | 62% | | | 640 | | | 577 | | | 11% | | | 1,270 | | | 2,376 | | | (47%) | | | Silver equivalent production(4) | k oz | | 1,242 | | | 1,221 | | | 2% | | | 1,242 | | | 1,219 | | | 2% | | | 3,460 | | | 3,752 | | | (8%) | | | Silver sales | k oz | | 1,552 | | | 620 | | | 150% | | | 1,552 | | | 1,170 | | | 33% | | | 3,154 | | | 3,568 | | | (12%) | | | Gold sales | oz | | 200 | | | - | | | 100% | | | 200 | | | 650 | | | 69% | | | 415 | | | 2,221 | | | (81%) | | | Silver equivalent sales(4) | k oz | | 1,568 | | | 620 | | | 153% | | | 1,568 | | | 1,227 | | | 28% | | | 3,188 | | | 3,752 | | | (15%) | | | Average realized silver price (6) | $/oz | | 24.34 | | | 24.65 | | | (1%) | | | 24.34 | | | 19.23 | | | 27% | | | 24.00 | | | 21.96 | | | 9% | | | Average market silver price | $/oz | | 23.57 | | | 24.13 | | | (2%) | | | 23.57 | | | 19.23 | | | 23% | | | 23.40 | | | 21.92 | | | 7% | | | Silver Equivalent Production Breakdown by Source | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pallacos | k oz | | 274 | | | 403 | | | (32%) | | | 274 | | | 394 | | | (30%) | | | 1,065 | | | 1,235 | | | (14%) | | | Mine reclamation stockpiles | k oz | | 53 | | | 38 | | | 38% | | | 53 | | | 166 | | | (68%) | | | 255 | | | 561 | | | (55%) | | | Cachi Laguna | k oz | | 137 | | | 125 | | | 9% | | | 137 | | | 159 | | | (14%) | | | 383 | | | 576 | | | (33%) | | | Oxide purchases | k oz | | 777 | | | 655 | | | 19% | | | 777 | | | 500 | | | 55% | | | 1,757 | | | 1,380 | | | 27% | | | Total | k oz | | 1,242 | | | 1,221 | | | 2% | | | 1,242 | | | 1,219 | | | 2% | | | 3,460 | | | 3,752 | | | (8%) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

Financial Results Summary

| (in thousands except for | | | Q3 | | | Q2 | | | % | | | Q3 | | | Q3 | | | % | | | YTD | | | YTD | | | % | | | per oz numbers) | | | 2023 | | | 2023 | | | Change | | | 2023 | | | 2022 | | | Change | | | 2023 | | | 2022 | | | Change | | | Revenue | | $ | 38,174 | | $ | 15,284 | | | 150% | | $ | 38,174 | | $ | 23,603 | | | 62% | | $ | 76,503 | | $ | 82,383 | | | (7%) | | | Cost of sales | | | 30,892 | | | 11,771 | | | 162% | | | 30,892 | | | 23,051 | | | 34% | | | 63,880 | | | 68,231 | | | (6%) | | | Income from mine operations | | | 6,273 | | | 2,448 | | | 156% | | | 6,273 | | | (1,430 | ) | | 539% | | | 9,095 | | | 8,606 | | | 6% | | | Net income (loss) | | | 76 | | | 169 | | | (141%) | | | 76 | | | (2,840 | ) | | 103% | | | 464 | | | (6,750 | ) | | 105% | | | Net income (loss) per share | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | -Basic | | | 0.00 | | | 0.00 | | | 100% | | | 0.00 | | | (0.02 | ) | | 100% | | | 0.00 | | | (0.04 | ) | | 100% | | | -Diluted | | | 0.00 | | | 0.00 | | | 100% | | | 0.00 | | | (0.02 | ) | | 100% | | | 0.00 | | | (0.04 | ) | | 100% | | | Net cash provided from (used in) operating activities | | | 8,661 | | | (5,293 | ) | | 264% | | | 8,661 | | | (2,503 | ) | | 446% | | | (955 | ) | | 245 | | | (490%) | | | Free cash flow(5) | | | 6,904 | | | (5,588 | ) | | 224% | | | 6,904 | | | (3,292 | ) | | 310% | | | (3,570 | ) | | (1,713 | ) | | 108% | | | EBITDA(5) | | | 4,280 | | | 3,657 | | | 11% | | | 4,280 | | | (4,708 | ) | | 186% | | | 9,453 | | | (235 | ) | | 4031% | | | Adjusted EBITDA(5) | | | 6,799 | | | 4,928 | | | 38% | | | 6,799 | | | (3,116 | ) | | 318% | | | 12,200 | | | 4,495 | | | 171% | | | Ending cash and cash equivalents | | | 76,823 | | | 70,427 | | | 9% | | | 76,823 | | | 84,674 | | | 9% | | | 76,823 | | | 84,674 | | | (9%) | | | Capital expenditures | | | 1,757 | | | 295 | | | 496% | | | 1,757 | | | 789 | | | 123% | | | 2,615 | | | 1,968 | | | 34% | | | Per ounce produced | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | OCC (by-product)(5) | | $ | 19.39 | | $ | 19.15 | | | 1% | | $ | 19.39 | | $ | 18.19 | | | 7% | | $ | 19.94 | | $ | 18.08 | | | 10% | | | Per ounce sold | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | OCC (by-product)(5) | | $ | 19.65 | | $ | 18.99 | | | 3% | | $ | 19.65 | | $ | 18.74 | | | 5% | | $ | 20.00 | | $ | 17.99 | | | 11% | | | AISC (by-product)(5) | | $ | 21.28 | | $ | 23.69 | | | (10%) | | $ | 21.28 | | $ | 21.69 | | | (2%) | | $ | 22.60 | | | 20.66 | | | 12% | |

(1) Material mined during 2023 and 2022 includes material from the Company's permitted areas, including Santa Rita, Huacajchi, Antuco, El Asiento, Monserrat and Tatasi-Portugalete. Mined material is reported as Run-of-Mine ("ROM").

(2) Purchased material includes oxidized material purchased from local mining cooperatives as well as through the Company's contract with RALP Compañia Minera S.R.L. ("RALP").

(3) Tonnes milled is reported as +8 mesh. The acronym "dmt" means dry metric tonnes.

(4) Silver equivalent production and silver equivalent sales include gold production and sales, respectively. Equivalent ounces are calculated using the Company's average realized gold and silver prices during the referenced period. Refer to the "Non-GAAP Financial Measures, Ratios and Supplementary Financial Measures" section of this news release for further detail.

(5) FCF, EBITDA, Adjusted EBITDA, OCC, costs per tonnes and AISC are measures of financial performance with no prescribed definition under IFRS. Refer to the "Non-GAAP Financial Measures, Ratios and Supplementary Financial Measures" section of this news release for further detail, including a reconciliation of these metrics to the financial statements.

(6) This supplementary financial measure within the meaning of NI 52-112 is calculated as a ratio of revenue from the consolidated financial statements and units of metal sold.

2023 Outlook Update and Guidance

In 1987, the City of Potosí, including the Cerro Rico Mountain, was declared a World Heritage site by UNESCO. Twenty-seven years later, in 2014, the Ministry of Mining and Metallurgy of Bolivia issued Ministerial Resolution, which regulates all mining operations on the Cerro Rico Mountain.

The Company agrees that protecting the Cerro Rico Mountain and City of Potosí while preserving the livelihoods of local mining cooperatives is very important.

In 2017, at the request of the Ministry of Mining & Metallurgy and the Departmental Federation of Mineral Cooperatives, COMIBOL defined new areas for the future relocation of miners working at an elevation of more than 4,400 metres. In response, Manquiri shifted its mining operations from above 4,400 metres to focus on mining its Pallacos located below 4,400 metres. Only partial progress has been achieved relocating mining cooperatives and privately held mining companies.

As the Company has accelerated the transition from mining its nearly depleted high-cost Pallacos to processing its lower cost FDF material, the Company has agreed to negotiate with COMIBOL a reduction of the Pallacos in exchange for new oxide deposits. As part of the negotiation, during Q3 2023, COMIBOL requested the Company provisionally suspend mining of its low-grade Pallacos until a final resolution is issued. The Company anticipates a resolution with COMIBOL shortly.

To bridge the gap between now and the anticipated commencement of the FDF production in H1 2024, the Company intends to increase the purchase of third-party oxides and processing of material from the recently signed contracts for the Alta Vista and Paca deposits. To date in 2023, silver equivalent ounces produced from third parties represents more than 78% of total ounces produced in Q3 2023 and 69% for the nine months ended September 30, 2023.

Following the completion of the FDF project by mid-2024, management is anticipating that production from the FDF and third-party oxide material will replace low-grade and high-cost tonnage from Pallacos.

Based on the first nine months of production at its Bolivian operations and the government restrictions on mining activities at Pallacos, the Company is decreasing its 2023 silver equivalent production guidance range to between 4.6 and 4.8 million ounces.

Based on (i) the hardness of third-party purchased oxide material, (ii) the increase in third-party purchases, and (iii) an increase in the cost of consumables, the Company is increasing its AISC guidance for its Bolivian operations by approximately 4% (based on the top end of revised AISC guidance provided in the Q2 2023 MD&A) to a range of $22.50 to $22.90 per silver ounce sold.

The following table sets out Andean's year-to-date results for its Bolivian operations against its original full year 2023 guidance and its revised 2023 guidance:

(1)Andean's commodity price assumptions supporting this estimate are $21/oz silver.

(2)Andean's commodity price assumptions supporting this estimate are $22/oz silver.

Q3 2023 Webcast

Management will host a webcast tomorrow morning to discuss the Company's Q3 2023 financial and operating results. A question-and-answer session will follow management's prepared remarks. Details of the webcast are as follows:

Date and time: Thursday, November 30, 2023 at 9:00 a.m. ET / 6:00 a.m. PT

Conference call: Canada/USA Toll Free: 1-800-319-4610 Toronto Toll: +1-416-915-3239 International Toll: +1-604-638-5340

Webcast: A live audio webcast of the earnings call will be available at https://www.gowebcasting.com/13100.