Santacruz Silver Mining Ltd. press release

Santacruz Silver Reports Third Quarter Financial Results

2022-11-30

TSX - Toronto Stock Exchange · Corporate Finance

Vancouver, British Columbia--(Newsfile Corp. - November 30, 2022) -Santacruz Silver Mining Ltd. (TSXV: SCZ) ("the Company" or "Santacruz") reports on its financial and operating results for the third quarter ("Q3") of 2022. The full version of the financial statements and accompanying management discussion and analysis can be viewed on the Company's website at www.santacruzsilver.comor on SEDAR at www.sedar.com. All financial information is prepared in accordance with International Financial Reporting Standards ("IFRS") and all dollar amounts are expressed in thousands of US dollars, except per unit amounts, unless otherwise indicated.

Quarterly revenues increased 501% to $87.7 million during Q3 2022 (Q3 2021: $14.6 million); Gross profit decreased 260% to a loss of $5.8 million during Q3 2022 (Q3 2021: profit $3.7 million), mainly due to an increase in depreciation and depletion charges at the Zimapan Mine of $3.4 million together with certain one-time accounting adjustments to cost of sales at the Bolivian operations in the amount of $3.4 combined with a reduction of the Average Realized Price per Ounce of Silver Equivalent of 18%; Cash costs were $17.89 per AgEq ounce and All-In Sustaining Costs ("AISC") (see "Non-GAAP Financial Measures", below) were $19.92 per AgEq ounce representing a decrease of 1% and 9%, respectively, compared to Q3 2021; Adjusted EBITDA increased 81% to $2.3 million during Q3 2022 (Q3 2021: $1.3 million) As a subsequent event, the Company has finalized the working capital adjustments estimates and paid Glencore the up-front Consideration Payment related to the Share Purchase Agreement for $2.1 million (please refer to press release dated March 21st, 2022); At the end of the quarter, the Company had cash and cash equivalents of $4.8 million, in addition to this, the Company has the ability to access a $10 million credit facility with Glencore and a $25 million short term bond program in the Bolivian Security Markets.

Carlos Silva, CEO of Santacruz, stated; "For the three months ended September 30, 2022 the Company recorded a net loss of $9.9 million (2021: net loss of $3.8). These results were due in part to a $3.4 million increase in deprecation and depletion at the Zimapan Mine combined with a certain one-time charges recorded to cost of sales and operating expenses in Bolivia, including the following adjustments: (i) $1.9 million related to salaries and benefits; (ii) $1.5 million related to professional services; and, (iii) $1.4 million related to inventory cost adjustment, as wellas a reduction in revenues attributed to lower realized silver prices.

Arturo Prestamo, Executive Chairman and Interim CFO of Santacruz, stated: "It is important to note that of the consideration payable to Glencore of $73.3 million, for its current portion, $43.6 million and $5.05 million are dependent on the collection of the VAT from the Bolivian Government and from the sales proceeds of the inventory held on the transaction date, respectively. In addition to these and as a subsequent event, the Company has already paid $2.1 million of the cash consideration. Accordingly, the non-dependent current Consideration payable to Glencore is reduced to $22.5 million. The next payment is scheduled to happen on March 2023."

Selected consolidated financial and operating information for the three and nine months ended September 30, 2022 and 2021 is presented below. The Sinchi Wayra and Illapa Business results have been consolidated from March 18, 2022.

| (Expressed in thousands of US Dollars, except where noted) | Three months ended September 30, | Variance % | Nine months ended September 30, | Variance % | | | | | | | | | | 2022 | 2021 | | | 2022 | 2021 | | | | | | | Financial | | | | | | | | | | | | | Revenue | 87,732 | | 14,601 | | 501% | | 355,771 | | 39,513 | | 800% | | Gross Profit | (5,843) | | 3,656 | | (206%) | | 51,985 | | 9,677 | | 437% | | Net Income (Loss) | (9,887) | | (3,849) | | 157% | | 3,769 | | (1,115) | | (438%) | | Net Income per Share - Basic ($/share) | (0.03) | | (0.01) | | 190% | | 0.01 | | 0.00 | | 0% | | Adjusted EBITDA (1) | 2,281 | | 1,263 | | 81% | | 48,993 | | 5,182 | | 845% | | Operating | | | | | | | | | | | | | Material Processed (tonnes milled) | 500.956 | | 188,947 | | 165% | | 1,163,645 | | 537,510 | | 116% | | Silver Equivalent Produced (ounces) (1) (2) | 4,850.949 | | 872,913 | | 456% | | 10,288,866 | | 2,378,948 | | 332% | | Silver Equivalent Sold (payable ounces) (1) (3) | 4.940.082 | | 839,929 | | 488% | | 16,768,464 | | 2,124,817 | | 689% | | Cash Cost of Production per Tonne ($/t) (1) | 69.56 | | 55.33 | | 26% | | 67.74 | | 53.64 | | 26% | | Cash Cost per Silver Equivalent Ounce Sold ($/oz) (1) | 17.89 | | 18.04 | | (1%) | | 17.74 | | 19.34 | | (8%) | | All-in Sustaining Cash Cost per Silver Equivalent Ounce Sold ($/oz) (1) | 19.92 | | 21.91 | | (9%) | | 19.18 | | 23.02 | | (17%) | | Average Realized Price per Ounce of Silver Equivalent Sold ($/oz) (1) (4) | 18.81 | | 22.81 | | (18%) | | 22.14 | | 24.37 | | (9%) |

(1)The Company reports non-IFRS measures, which include Adjusted EBITDA, Cash Cost of Production per Tonne, Cash Cost per Silver Equivalent Ounce Sold, All-in Sustaining Cash Cost per Silver Equivalent Ounce Sold, Average Realized Price per Ounce of Silver Equivalent Sold. These measures are widely used in the mining industry as a benchmark for performance, but does not have a standardized meaning and may differ from methods used by other companies with similar descriptions. Refer to the "Non-IFRS Measures" section in Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") for definitions and a reconciliation of Adjusted EBITDA to the annual and quarterly financial statements. (2)Silver Equivalent Produced (ounces) in 2022 have been calculated using prices of $25.60/oz., $0.94/lb., $1.20/lb. and $4.01/lb. for silver, lead, zinc and copper respectively applied to the metal production divided by the silver price plus the respective concentrate produced by the Zimapan Mine, Bolivar, Porco, Tres Amigos, Reserva and Colquechaquita Mines multiplied by the respective silver content. Silver Equivalent Produced (ounces) in 2021 have been calculated using prices of $25.00/oz, $0.85/lb, $1.05/lb and $3.00/lb for silver, lead, zinc and copper respectively applied to the metal production divided by the silver price plus the respective concentrate produced by the Zimapan Mine and the Rosario Project, multiplied by the respective silver content. (3)Silver Equivalent Sold (payable ounces) have been calculated using the Average Realized Price per Ounce of Silver Equivalent Sold stated in the table above, applied to the payable metal content of the concentrates sold from the Zimapan Mine, the Bolivaor, Porco, Tres Amigos, Reserva and Colquechaquita Mines in 2022 and the Zimapan Mine and Rosario Project in 2021. (4)Average Realized Price per Ounce of Silver Equivalent Sold is prior to all treatment, smelting and refining charges.

Discussion of Consolidated Financial Results

As compared to the three months ended September 30, 2021, the Company recorded a net loss of $9,887 (net loss: $3,849) and as compared to the nine months ended September 30, 2021, a net profit of $3,769 (net loss: $1,115). Net loss for the three months ended September 30, 2022, was impacted by increased cost of sales as a result of an increase of $2,267 in accrued liabilities and $16,822 in non-current provision payable to employees of the Sinchi Wayra and Illapa Business in the event that employment is terminated, and a reduction in realised silver price.

As compared to the three months ended September 30, 2021, revenues were $87,732 ($14,601), mining operation cash costs of sales were $83,212 ($10,602) and depletion and amortization expenses were $10,363 ($343) resulting in a gross loss of $5,843 (profit: $3,656).

Operating Results

Selected operating results for the Sinchi Wayra and Illapa Business, Zimapan Mine and Rosario Project for the three and nine months ended September 30, 2022 and 2021 is presented below:

| | Three months ended September 30, | Variance % | Nine months ended September 30, | Variance % | | | | | 2022 | 2021 | | 2022 | 2021 | | | Material Processed (tonnes milled) | | | | | | | | Sinchi Wayra and Illapa Business (Bolivia) (6) | 285,191 | - | 0% | 556,453 | - | 0% | | Zimapan Mine (Mexico) | 215,765 | 186,642 | 16% | 607,192 | 498,481 | 22% | | Rosario Project (Mexico) (5) | - | 2,306 | (100%) | - | 39,029 | (100%) | | Consolidated | 500,956 | 188,947 | 165% | 1,163,645 | 537,510 | 116% | | Silver Equivalent Produced (ounces) (1) | | | | | | | | Sinchi Wayra and Illapa Business (Bolivia) (6) | 3,862,342 | - | 0% | 7,484,550 | - | 0% | | Zimapan Mine (Mexico) | 988,608 | 867,215 | 14% | 2,804,316 | 2,271,237 | 23% | | Rosario Project (Mexico) (5) | - | 5,698 | (100%) | - | 107,711 | (100%) | | Consolidated | 4,850,949 | 872,913 | 456% | 10,288,866 | 2,378,948 | 332% | | Silver Equivalent Sold (payable ounces) (2) | | | | | | | | Sinchi Wayra and Illapa Business (Bolivia) (6) | 3,886,460 | - | 0% | 13,946,159 | - | 0% | | Zimapan Mine (Mexico) | 1,053,622 | 829,164 | 27% | 2,822,306 | 2,041,204 | 38% | | Rosario Project (Mexico) (5) | - | 10,765 | (100%) | - | 83,613 | (100%) | | Consolidated | 4,940,082 | 839,929 | 488% | 16,768,464 | 2,124,817 | 689% | | Cash Cost of Production per Tonne (3) | | | | | | | | Sinchi Wayra and Illapa Business (Bolivia) (6) | 89.42 | - | 0% | 90.31 | - | 0% | | Zimapan Mine (Mexico) | 43.31 | 53.88 | (20%) | 47.10 | 52.37 | (10%) | | Rosario Project (Mexico) (5) | - | 173.04 | (100%) | - | 69.85 | (100%) | | Consolidated | 69.56 | 55.33 | 26% | 67.74 | 53.64 | 26% | | Cash Cost per Silver Equivalent Ounce Sold (3) | | | | | | | | Sinchi Wayra and Illapa Business (Bolivia) (6) | 18.87 | - | 0% | 18.15 | - | 0% | | Zimapan Mine (Mexico) | 14.30 | 17.72 | (19%) | 15.75 | 18.53 | (15%) | | Rosario Project (Mexico) (5) | - | 42.80 | (100%) | - | 39.26 | (100%) | | Consolidated | 17.89 | 18.04 | (1%) | 17.74 | 19.34 | (8%) | | All-in Sustaining Cash Cost per Silver Equivalent Ounce Sold (3) | | | | | | | | Sinchi Wayra and Illapa Business (Bolivia) (6) | 20.61 | - | 0% | 19.14 | - | 0% | | Zimapan Mine (Mexico) | 17.19 | 21.33 | (19%) | 18.64 | 21.25 | (12%) | | Rosario Project (Mexico) (5) | - | 67.26 | (100%) | - | 66.28 | 0% | | Consolidated | 19.92 | 21.91 | (9%) | 19.18 | 23.02 | (17%) | | Average Realized Price per Ounce of Silver Equivalent Sold (3) (4) | | | | | | | | Sinchi Wayra and Illapa Business (Bolivia) (6) | 18.81 | - | 0% | 22.42 | - | 0% | | Zimapan Mine (Mexico) | 18.50 | 22.81 | (19%) | 20.70 | 24.35 | (15%) | | Rosario Project (Mexico) (5) | - | 22.47 | (100%) | - | 24.92 | 0% | | Consolidated | 18.81 | 22.81 | (18%) | 22.14 | 24.37 | (9%) |

(1)Silver Equivalent Produced (ounces) in 2022 have been calculated using prices of $25.60/oz, $0.94/lb, $1.20/lb and $4.01/lb for silver, lead, zinc and copper respectively applied to the metal production divided by the silver price plus the respective concentrate produced by the Zimapan Mine, the Bolivar, Porco, Tres Amigos, Reserva and Colquechaquita Mines multiplied by the respective silver content. Silver Equivalent Produced (ounces) in 2021 have been calculated using prices of $25.00/oz, $1,925.00/oz, $0.85/lb, $1.05/lb and $3.00/lb for silver, gold, lead, zinc and copper respectively applied to the metal production divided by the silver price plus the respective concentrate produced by the Zimapan Mine and the Rosario Project, multiplied by the respective silver content. (2)Silver Equivalent Sold (payable ounces) have been calculated using the Average Realized Price per Ounce of Silver Equivalent Sold stated in the table above, applied to the payable metal content of the concentrates sold from the Zimapan Mine the Bolivar, Porco, Tres Amigos, Reserva and Colquechaquita Mines in 2022 and the Zimapan Mine and Rosario Project in 2021. (3)The Company reports non-IFRS measures, which include Cash Cost of Production per Tonne, Cash Cost per Silver Equivalent Ounce Sold, All-in Sustaining Cash Cost per Silver Equivalent Ounce Sold and Average Realized Price per Ounce of Silver Equivalent Sold. These measures are widely used in the mining industry as a benchmark for performance, but do not have a standardized meaning and may differ from methods used by other companies with similar descriptions. See ''Non-IFRS Measures'' section below for definitions. (4)Average Realized Price per Ounce of Silver Equivalent Sold is prior to all treatment, smelting and refining charges. (5)Operations at the Rosario Project were suspended with no production from August 2021, hence the variance is of limited value. (6)On March 18, 2022, the Company acquired the Bolivar, Porco, Tres Amigos, Reserva and Colquechaquita Mines, hence the variance is of limited value.

Discussion of Operating Results and Costs

Consolidated Q3 2022

Consolidated silver equivalent production increased 456% in Q3 2022 to 4,850,949 ounces as compared to 872,913 during Q3 2021. This increase is largely due to production from Bolivian operations acquired in March 2022, a 14% increase in silver equivalent production from the Zimapan Mine offset by no production from the Rosario Project following suspension of operations in August 2021.

Consolidated cash cost of production per tonne of mineralized material processed increased 26% in Q3 2022 to $69.56/t as compared to $55.33/t in Q3 2021. This change reflects the higher unit costs at the Bolivian operations ($89.42/t) compared to the Q3 2021 consolidated unit costs, a 20% decrease in unit costs at the Zimapan Mine and no unit costs for the Rosario Project in Q3 2022 following suspension of operations in August 2021. The Zimapan Mine cash cost of production decreased 7% to $9,345, despite a 16% increase in tonnes milled.

Consolidated cash cost per silver equivalent ounce sold decreased 1% in Q3 2022 to $17.89/oz as compared to $18.04/oz in Q3 2021. This change reflects the higher unit costs at the Bolivian operations ($18.87/oz) compared to the Q3 2021 consolidated unit costs, a 19% decrease in the unit costs at the Zimapan Mine and no unit costs for the Rosario Project in Q3 2022 following suspension of operations in August 2021.

Consolidated cash costs increased 483% in Q3 2022 to $88,385 as compared to $15,156 in Q3 2021, reflecting a 3% increase in cash costs at the Zimapan Mine, cash costs at the Bolivian operations of $73,319 and no cash costs for the Rosario Project in Q3 2022 following suspension of operations in August 2021. Increased costs at the Zimapan Mine were offset by a 27% increase in silver equivalent ounces sold at the Zimapan Mine.

Consolidated AISC per silver equivalent ounce sold decreased 9% in Q3 2022 to $19.92/oz as compared to $21.91/oz in Q3 2021. This change reflects the lower unit costs at Bolivian operations ($20.61/oz) compared to the Q3 2021 consolidated unit costs, a 19% decrease in the unit costs at the Zimapan Mine and no unit costs for the Rosario Project in Q3 2022 following suspension of operations in August 2021. Consolidated AISC increased 435% in Q3 2022 to $98,417 as compared to $18,406 in Q3 2021, reflecting a 2% increase in AISC at the Zimapan Mine, AISC at the Bolivian operations of $80,098 and no cash costs for the Rosario Project in Q3 2022 following suspension of operations in August 2021. Increased costs at the Zimapan Mine were offset by a 27% increase in silver equivalent ounces sold at the Zimapan Mine.

Consolidated Nine Months Ended September 30, 2022

Consolidated cash cost of production per tonne of mineralized material processed increased 26% in YTD 2022 to $67.74/t as compared to $53.64/t in YTD 2021. This change reflects the higher unit costs at Bolivian operations ($90.31/t) compared to the YTD 2021 consolidated unit costs, a 10% decrease in unit costs at the Zimapan Mine and no unit costs for the Rosario Project in YTD 2022 following suspension of operations in August 2021. The Zimapan Mine cash cost of production increased 10% to $28,597, which was offset in part by a 22% increase in tonnes milled.

Consolidated cash cost per silver equivalent ounce sold decreased 8% in YTD 2022 to $17.74/oz as compared to $19.34/oz in YTD 2021. This change reflects the higher unit costs at the Bolivian operations ($18.15/oz) compared to the YTD 2021 consolidated unit costs, a 15% decrease in the unit costs at the Zimapan Mine and no unit costs for the Rosario Project in YTD 2022 following suspension of operations in August 2021.

Consolidated cash costs increased 624% in YTD 2022 to $297,522 as compared to $41,097 in YTD 2021, reflecting an 18% increase in cash costs at the Zimapan Mine, cash costs at the Bolivian operations of $253,062 and no cash costs for the Rosario Project in YTD 2022 following suspension of operations in August 2021. Increased costs at the Zimapan Mine were offset by a 38% increase in silver equivalent ounces sold at the Zimapan Mine.

Consolidated AISC per silver equivalent ounce sold decreased 17% in YTD 2022 to $19.18/oz as compared to $23.02/oz in YTD 2021. This change reflects the lower unit costs at the Bolivian operations ($19.14/oz) compared to the YTD 2021 consolidated unit costs, a 12% decrease in unit costs at the Zimapan Mine and no unit costs for the Rosario Project in YTD 2021 following suspension of operations in August 2021. Consolidated AISC increased 557% in YTD 2022 to $321,582 as compared to $48,919 in YTD 2021, reflecting a 21% increase in AISC at the Zimapan Mine, AISC at the Bolivian operations of $266,997 and no cash costs for the Rosario Project in YTD 2022 following suspension of operations in August 2021. Increased costs at the Zimapan Mine were offset by a 38% increase in silver equivalent ounces sold at the Zimapan Mine.

Sinchi Wayra and Illapa Business (Bolivia)

On March 18, 2022, the Company acquired the Sinchi Wayra and Illapa Business from Glencore. As a result, no comparative analysis of Q3 2022 to Q3 2021 or YTD 2022 to YTD 2021 is provided.

Production at the Bolivar, Porco, Tres Amigos, Reserva and Colquechaquita Mines are supported by NI 43-101 technical reports.

Zimapan Mine (Mexico)

Silver equivalent ounce production in Q3 2022 increased 14% to 988,608 ounces as compared to 867,215 ounces in Q3 2021. This increase is largely due to a 16% increase in mineralized material processed at the Zimapan milling facility and the impact of using different metal price decks for the 2022 and 2021 fiscal years. The Q3 2022 silver equivalent ounce production increased 4% (after adjusting for the metal price deck) as compared to Q3 2021.

Silver equivalent ounce production in YTD 2022 increased 23% to 2,804,316 ounces as compared to 2,271,237 ounces in YTD 2021. This increase is largely due to a 22% increase in mineralized material processed at the Zimapan milling facility and the impact of using different metal price decks for the 2022 and 2021 fiscal years. The YTD 2022 silver equivalent ounce production increased 12% (after adjusting for the metal price deck) as compared to YTD 2021.

Cash cost of production per tonne of mineralized material processed decreased 20% in Q3 2022 to $43.31/t as compared to $53.88/t in Q3 2021 reflecting a 3% increase in cash costs of production offset by the aforementioned 16% increase in mineralized material processed.

Cash cost of production per tonne of mineralized material processed decreased 10% in YTD 2022 to $47.10/t as compared to $52.37/t in YTD 2021 reflecting an 18% increase in cash costs of production offset by the aforementioned 22% increase in mineralized material processed.

AISC per silver equivalent ounce sold decreased 19% in Q3 2022 to $17.19/oz as compared to $21.33/oz in Q3 2021 reflecting a 2% increase in AISC, which was offset by the aforementioned 27% increase in silver equivalent ounces sold.

AISC per silver equivalent ounce sold decreased 12% in YTD 2022 to $18.64/oz as compared to $21.25/oz in YTD 2021 reflecting a 21% increase in AISC, which was offset by the aforementioned 38% increase in silver equivalent ounces sold.