Andean Precious Metals Reports Q4/FY 2023 Results; Meets 2023 Revised Production Guidance

2024-03-27

NYSE - New York Stock Exchange · Copper · Gold · Silver · Zinc · Lead · Nickel · Cobalt · Platinum · Palladium · Vanadium · United States

Production is expected to double in 2024 with full year inclusion of Golden Queen

Toronto, Ontario--(Newsfile Corp. - March 27, 2024) - Andean Precious Metals Corp. (TSXV: APM) (OTCQX: ANPMF) ("Andean" or the "Company") reported its operating highlights and financial results for the three and twelve months ended December 31, 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 audited consolidated financial statements for the three and twelve months ended December 31, 2023 (the "Financial Statements"), which are available under the Company's profile on SEDAR+ (www.sedarplus.ca) and on Andean's website www.andeanpm.com.

"In just twelve months, we have significantly advanced our growth strategy and taken meaningful steps to reposition the Company," said Alberto Morales, Executive Chairman and Chief Executive Officer. "In 2023, San Bartolomé successfully transitioned to an oxide processor focused on increasing cash flow generation. Last year we acquired Golden Queen, providing geographical diversification and adding a producing gold and silver mine with expected upside opportunities. With the addition of a second producing asset, we are poised to substantially increase our gold and silver production, while increasing our operating cash flow."

Mr. Morales continued, "While our team achieved significant milestones in 2023, we are just beginning to reap the rewards of our efforts. At Golden Queen, our focus is on optimizing mine operations, implementing a new mine plan, driving cost efficiencies, and delivering positive exploration results. Meanwhile, at San Bartolomé, our goal is to improve operating cash flow following the completion and commissioning of our FDF processing facility. As we think about 2024, our focus will be on streamlining and enhancing our operations in Bolivia and the United States while actively seeking additional acquisitions to sustain and accelerate our growth."

Q4 2023 and Full Year 2023 Highlights

Met revised full year 2023 production guidance of between 4.6 and 4.8 Moz AgEq

The Company produced 4.7 Moz of silver equivalent ("AgEq")1in 2023, excluding Golden Queen's production of 0.5 Moz AgEq, or 6,528 oz gold equivalent ("AuEq")1, from November 24, 2023 (the "Acquisition Date") to December 31, 2023. Production for the full year 2022 was 5.0 Moz AgEq.

Q4 2023 production was 1.2 Moz AgEq from San Bartolomé, excluding Golden Queen's production of 0.5 Moz AgEq, or 6,528 oz AuEq, from the Acquisition Date to December 31, 2023.

Increased revenue; achieved record quarterly revenue in Q4 2023

In Q4 2023, the Company achieved record quarterly revenue of $48.8 million from the sale of 2.0 Moz AgEq at an average realized silver price of $24.42 per ounce, compared with Q4 2022 revenue of $25.7 million from the sale of 1.2 Moz AgEq at an average realized silver price of $21.19 per ounce.

For the year ended December 31, 2023, revenue was $125.3 million, $17.3 million higher than full year 2022. The increase of $17.3 million was primarily attributable to $13.3 million of incremental revenue from Golden Queen and $4.0 million from higher average realized silver prices offset by lower sales at San Bartolomé.

Higher gross operating income: The Company recorded gross operating income of $5.1 million and $14.2 million for Q4 2023 and full year 2023, respectively, compared to $1.1 million and $9.7 million for Q4 2022 and full year 2022, respectively. Gross operating income for both Q4 2023 and full year 2023 included $0.3 million for Golden Queen from the Acquisition Date to December 31, 2023.

Higher net income primarily due to $36.5 million gain recognized on bargain purchase ("Purchase Gain") of Golden Queen

For Q4 2023, the Company reported net income of $38.1 million, or $0.24 per basic share and $0.21 per diluted share for Q4 2023, compared to a net loss of $3.3 million, or $0.02 per basic and diluted share for Q4 2022.

For 2023, net income was $38.5 million, or $0.24 per basic and $0.22 per diluted share, compared with a net loss of $10.1 million, or $0.06 per basic and diluted share in 2022.

Increased net cash flow provided from operating activities: Net cash flow provided from operating activities was $5.1 million for Q4 2023 and $4.2 million for full year 2023, compared with net cash flow used in operating activities of $3.0 million and $2.7 million for Q4 2022 and full year 2022, respectively.

Earnings before interest, taxes, depreciation and amortization ("EBITDA")2: EBITDA was $40.7 million and $50.2 million for Q4 2023 and full year 2023, respectively, compared to negative EBITDA of $1.3 million and $1.6 million for Q4 2022 and full year 2022, respectively. The increase was mainly due to the $36.5 million Purchase Gain recognized on the acquisition of Golden Queen, an increase in sales volumes and a higher average realized silver price per ounce sold.

Adjusted EBITDA2: Adjusted EBITDA recognized for Q4 2023 and full year 2023 were $7.9 million and $20.1 million, respectively, compared to negative $1.0 million and $3.5 million for Q4 2022 and full year 2022, respectively. The increase was primarily due to growth in sales volumes and a higher average realized silver price per ounce sold and partially offset by an increase in non-recurring corporate development costs.

Executing on Growth Initiatives

Acquired a 100% interest in Golden Queen and its Soledad Mountain mine and heap leach operation from Auvergne Umbrella LLC.

The Company's consolidated financial statements include $13.3 million in revenue and $0.4 million in net income before income tax from Golden Queen from the Acquisition Date to December 31, 2023. Had the transaction been completed on January 1, 2023, Golden Queen would have contributed revenue of $91.3 million for the period of January 1, 2023 to December 31, 2023, and the Company's full year 2023 consolidated revenue would have been $216.7 million.

Commenced post-acquisition plans to optimize operations of Golden Queen that are expected to increase production, improve costs, and extend the mine life.

San Bartolomé has fully transitioned to a material processing operation with a focus on sourcing high-grade, high margin material. Additionally, the Company expects to commence processing tailings material from its fines disposal facility ("FDF") in the first half of 2024. During 2023, San Bartolomé signed several long-term contracts for oxidized material, including:

In June 2023, signed a 24-month agreement to purchase 170,000 tonnes of high-grade (average silver grade of 354 g/t) from the Alta Vista project owned by Empresa Minera Bedrock S.R.L.

In September 2023, signed an agreement with Silver Elephant Mining Corp. granting Manquiri an exclusive right to purchase up to 800,000 tonnes (average silver grade of 223 g/t) of oxide material from Silver Elephant's Paca Silver Project until January 31, 2029, or upon receiving the specified quantity.

A Preliminary Feasibility Study Technical Report for San Bartolomé Mine Bolivia, which was filed on SEDAR+ on February 16, 2024, included an updated mineral resource and mineral reserve estimate; San Bartolomé's life of operation is 4.6 years based on a recoverable proven and probable reserve of 11.95 Moz with an average grade of 93 g/t Ag.

A Feasibility Study Update Technical Report on the Soledad Mountain Heap Leach Project was filed on SEDAR+ on January 31, 2024. Golden Queen's new life of mine average annual production is expected to include up to 65,000 oz of gold and 466,000 oz of silver for 5 years.

Balance sheet maintained for ongoing strategic growth

The Company had total liquid assets of $72.8 million as at December 31, 2023, including cash of $64.9 million, accounts receivable of $0.9 million, VAT certificates of $1.8 million and $5.2 million of marketable securities. This compares with $90.4 million of total liquid assets as at December 31, 2022, which included cash of $80.7 million, accounts receivable of $0.2 million, VAT certificates of $4.1 million and $5.3 million in marketable securities, translating into negative net debt. The reason for the decrease in liquid assets is primarily due to the acquisition of Golden Queen, including an upfront cash payment, debt repayment and capital expenditures.

There were zero-cost collar contracts in place at December 31, 2023 for 300,000 ounces of silver associated with San Bartolomé's production. The zero-cost collar contracts were written at an average put strike price of $23 per ounce of silver and an average call strike price of $30 per ounce of silver, for 100,000 ounces per month for the period January-March 2024.

As at December 31, there were zero-cost collar contracts in place for 12,000 ounces of gold relating to Golden Queen's production. The zero-cost collar contracts were written at an average put strike price of $2,000 per ounce of gold and an average call strike price of $2,212 per ounce of gold, for 2,000 ounces per month for the period January-June 2024.

Responsible operations: The Company reported no lost-time incidents and no negative environmental issues during 2023.

Normal Course Issuer Bid ("NCIB")

Pursuant to an NCIB commencing October 4, 2022 and expiring on October 3, 2023, the Company repurchased and cancelled a total of 3,160,100 shares at an average purchase price of C$0.79 per share for a total of $1.9 million (C$2.5 million).

On December 21, 2023, the Company renewed its NCIB. As of March 25, 2024, the Company has repurchased 5,333,291 common shares at an average purchase price of C$0.70 per share for a total of $2.8 million (C$3.7 million).

Since the inception of its NCIB in the fall of 2022, the Company has repurchased 8,493,391 common shares at an average purchase price of C$0.73 per share for a total of $4.6 million (C$6.2 million).

Summary of Financial and Operating Results

| (In thousands except per share and per oz) | | | Q4 20233 | | | Q4 2022 | | | Change | | | FY 20233 | | | FY 2022 | | | Change | | | | | | | | | | | | | | | | | | | | | | | | Financial performance | | | | | | | | | | | | | | | | | | | | | Revenue | $ | | 48,821 | | $ | 25,666 | | | 90% | | $ | 125,324 | | $ | 108,049 | | | 16% | | | Cost of sales | | | 42,012 | | | 22,902 | | | 83% | | | 105,892 | | | 91,133 | | | 16% | | | Depreciation and depletion | | | 1,703 | | | 1,666 | | | 2% | | | 5,231 | | | 7,212 | | | (27%) | | | Gross operating income | | | 5,106 | | | 1,098 | | | 365% | | | 14,201 | | | 9,704 | | | 46% | | | Purchase Gain - Golden Queen | | | 36,512 | | | - | | | 100% | | | 36,512 | | | - | | | 100% | | | Net income (loss) after tax | | | 38,076 | | | (3,341) | | | 1,240% | | | 38,540 | | | (10,091) | | | 482% | | | Net income (loss) per share | | | | | | | | | | | | | | | | | | | | | ̶ Basic | | | 0.24 | | | (0.02) | | | 1,237% | | | 0.24 | | | (0.06) | | | 482% | | | ̶ Diluted | | | 0.21 | | | (0.02) | | | 1,095% | | | 0.22 | | | (0.06) | | | 439% | | | Net cash provided from (used in) operating activities | | | 5,121 | | | (2,985) | | | 272% | | | 4,166 | | | (2,740) | | | 252% | | | Free cash flow4 | | | 1,719 | | | (3,381) | | | 151% | | | (1,851) | | | (5,094) | | | 64% | | | EBITDA4 | | | 40,718 | | | (1,348) | | | 3,121% | | | 50,171 | | | (1,583) | | | 3,269% | | | Adjusted EBITDA4 | | | 7,863 | | | (956) | | | 922% | | | 20,063 | | | 3,539 | | | 467% | | | Capital expenditures | | | 3,402 | | | 246 | | | 1,283% | | | 6,017 | | | 2,204 | | | 173% | | | Ending cash and cash equivalents | | | 64,907 | | | 80,729 | | | (20%) | | | 64,907 | | | 80,729 | | | (20%) | | | | | | | | | | | | | | | | | | | | | | | | (In thousands except metal price per oz) | | | Q4 20233 | | | Q4 2022 | | | Change | | | FY 20233 | | | FY 2022 | | | Change | | | | | | | | | | | | | | | | | | | | | | | | Operating highlights | | | | | | | | | | | | | | | | | | | | | Gold ounces produced | | | | | | | | | | | | | | | | | | | | | Golden Queen (oz) | | | 5,108 | | | - | | | 100% | | | 5,108 | | | - | | | 100% | | | San Bartolomé (oz) | | | 710 | | | 184 | | | 286% | | | 1,980 | | | 2,560 | | | (23%) | | | Consolidated gold ounces produced (oz) | | | 5,818 | | | 184 | | | 3,062% | | | 7,088 | | | 2,560 | | | 177% | | | Gold ounces sold | | | | | | | | | | | | | | | | | | | | | Golden Queen (oz) | | | 5,849 | | | - | | | 100% | | | 5,849 | | | - | | | 100% | | | San Bartolomé (oz) | | | 1,441 | | | 120 | | | 1,100% | | | 1,856 | | | 2,341 | | | (21%) | | | Consolidated gold ounces sold (oz) | | | 7,290 | | | 120 | | | 5,975% | | | 7,705 | | | 2,341 | | | 229% | | | Average realized gold price ($/oz) | $ | | 2,028 | | $ | 1,750 | | | 16% | | $ | 2,023 | | $ | 1,814 | | | 12% | | | Average market gold price ($/oz) | $ | | 1,974 | | $ | 1,727 | | | 14% | | $ | 1,942 | | $ | 1,801 | | | 8% | | | Silver ounces produced | | | | | | | | | | | | | | | | | | | | | Golden Queen (koz) | | | 51 | | | - | | | 100% | | | 51 | | | - | | | 100% | | | San Bartolomé (koz) | | | 1,194 | | | 1,233 | | | (3%) | | | 4,511 | | | 4,788 | | | (5%) | | | Consolidated silver ounces produced (koz) | | | 1,245 | | | 1,233 | | | 1% | | | 4,602 | | | 4,788 | | | (4%) | | | Silver ounces sold | | | | | | | | | | | | | | | | | | | | | Golden Queen (koz) | | | 57 | | | - | | | 100% | | | 57 | | | - | | | 100% | | | San Bartolomé (koz) | | | 1,336 | | | 1,201 | | | 11% | | | 4,490 | | | 4,769 | | | (6%) | | | Consolidated silver ounces sold (koz) | | | 1,393 | | | 1,201 | | | 16% | | | 4,547 | | | 4,769 | | | 5% | | | Average realized silver price ($/oz) | $ | | 24.42 | | $ | 21.19 | | | 15% | | $ | 24.13 | | $ | 21.76 | | | 11% | | | Average market silver price ($/oz) | $ | | 23.20 | | $ | 21.17 | | | 10% | | $ | 23.35 | | $ | 21.73 | | | 7% | | | Silver equivalent ounces produced | | | | | | | | | | | | | | | | | | | | | Golden Queen (koz) | | | 479 | | | - | | | 100% | | | 479 | | | - | | | 100% | | | San Bartolomé (koz) | | | 1,255 | | | 1,250 | | | 1% | | | 4,715 | | | 5,001 | | | (6%) | | | Consolidated silver equivalent ounces produced (koz) | | | 1,730 | | | 1,250 | | | 38% | | | 5,194 | | | 5,001 | | | 4% | | | Silver equivalent ounces sold | | | | | | | | | | | | | | | | | | | | | Golden Queen (koz) | | | 549 | | | - | | | 100% | | | 549 | | | - | | | 100% | | | San Bartolomé (koz) | | | 1,454 | | | 1,213 | | | 20% | | | 4,643 | | | 4,965 | | | (6%) | | | Consolidated silver equivalent ounces sold (koz) | | | 1,999 | | | 1,213 | | | 65% | | | 5,192 | | | 4,965 | | | 5% | |

2024 Outlook and Guidance

This outlook includes forward-looking information about the Company's operations and financial expectations based on management's expectations and outlook as of March 26, 2024. This outlook, including expected results and targets, is subject to various risks, uncertainties, and assumptions predicated on global economic conditions. Actual results may vary materially from management's expectations. See the "Forward-Looking Statements" and "Risks Factors" sections in the Company's MD&A for the year ended December 31, 2023 for further information.

The Company's guidance for its annual production, operating costs and capital expenditures is discussed in detail below.

Production guidance

_Golden Queen _At Golden Queen, 2024 production is expected to be 60,000 AuEq (+/- 5%) based on current mining plans and in line with the technical report issued in January 2024. As announced, the fire incident at Golden Queen in December 2023 will impact its Q1 2024 production. However, production will ramp up to between 15,000 oz AuEq and 18,000 oz AuEq on average per quarter from Q2 2024 to Q4 2024. Total mine tonnage production is estimated at 26.8 million tonnes (+/-5%) including 3.9 million tonnes (+/-5%) of ore estimated to be stacked to the leach pad resulting in a strip ratio of 5.9:1. Mine ore grades are estimated to average 0.805 g/t AuEq in 2024, a decrease from 0.869 g/t AuEq in 2023. Heap leach crushing and stacking activities will add 3.9 million tonnes in 2024 to the pad resulting in production of 60,000 oz AuEq (+/-5%). Apparent recovery for 2024 is estimated at 63.2%.

_San Bartolomé _Mining activities at San Bartolomé were suspended in Q3 2023. Production of 5.0 Moz AgEq is expected to be derived mostly from third-party purchased material sourced primarily from Cachi Laguna, Cerro Rico, Paca and other rural cooperatives. Material purchases are negotiated for larger volumes and longer-term contracts at prices and payment terms conditional on the nature and geology of each deposit. When silver prices change significantly, new negotiations may occur in some instances, which could impact the grade/price curve. Following the completion of the FDF project in the first half of 2024, management is anticipating production of 0.8 Moz AgEq (+/- 5%) from the FDF in 2024. Total tonnes milled in 2024 are expected to be 1.4 million tonnes (+/- 5%), recovering 5.0 Moz AgEq (+/- 5%) at a 144 g/t head grade and a calculated recovery of 78% compared to the same recovery rate in 2023. The increase in average grade is due to high-grade material from Cerro Rico, Paca and Cachi Laguna.

_Consolidated _In 2024, on a consolidated basis, silver equivalent ounces production is expected to increase by 121% to 10.4 Moz AgEq (+/- 5%) (115,000 gold equivalent ounces +/-5%). The increase is largely due to full year production of 60,000 oz AuEq (+/- 5%), or 5.4 Moz AgEq (+/- 5%), expected from Golden Queen.

Cost guidance

With the acquisition of Golden Queen, the revenue split in 2024 is estimated to be 54% gold and 46% silver. In addition, San Bartolomé's operations no longer include mining activities, as it transitioned exclusively to ore purchasing and processing during Q3 2023. Therefore, providing consolidated cost guidance may not provide meaningful information for measuring key indicators of performance_._

Below is the cost guidance for each of the Company's operations, based on their respective primary metal contribution:

| | | | 2024 Guidance +/- 5% | | | Actual 2023 | | | Golden Queen | | | | | | | | | Operating cash cost ("OCC") per Au Eq oz produced, on a by-product credit basis7 | $ | 1,500 | | | - | | | | All-in sustaining costs ("AISC") per Au Eq oz sold, on a by-product credit basis | $ | 1,750 | | | - | | | | San Bartolomé | | | | | | | | | Cash gross operating margin per Ag Eq oz produced8 | $ | 3.88 | | $ | 2.71 | | | | Gross margin ratio9 | | 19.5% | | | 12.4% | | |

_Golden Queen _OCC per gold equivalent ounce produced at Golden Queen is expected to be $1,500 (+/- 5%) in 2024. The Company expects its AISC at Golden Queen to be $1,750 per gold equivalent ounce sold (+/- 5%) for 2024.

_San Bartolomé _As a result of the transition to exclusively processing activities during Q4 2023, silver equivalent ounces produced from third-party material sources represent more than 98% and 78% for Q4 2023 and full year 2023, respectively, compared to 68% and 67% for Q4 2022 and full year 2022. The purchase price paid to third-party material suppliers is impacted by several factors including precious metal spot prices, head grade per tonne and material volume.

In evaluating the performance and profitability of San Bartolomé, management is adopting two new metrics: cash gross operating margin ("CGOM") per equivalent ounces and gross margin ratio ("GMR"). These new indicators provide information on the gross amount of cash that could be generated from the production or sale of one unit (oz) of silver equivalent. The Company believes CGOM and GMR metrics are useful to investors because they provide insight into operational profitability relative to performance on a period-by-period basis derived from purchase ore that is subject to unpredictable variable inputs. These metrics are conceptually understood and reported in the tolling or processing industry.