Earnings call transcript: Andean Precious Metals reports record revenue in Q4 2024

Andean Precious Metals (APM) reported record revenues of $254 million in Q4 2024, alongside a strong net income of $19.2 million, equivalent to $0.12 per share. The company also achieved a record adjusted EBITDA of $62.9 million. Despite the positive financial performance, APM’s stock saw a slight decline, with a 3.13% drop in its last trading session. According to InvestingPro data, the stock has experienced significant volatility, with a 90% decline over the past year, though showing a strong 2.75% return in the past week. The company remains optimistic about 2025, projecting consolidated gold equivalent production between 102,900 and 117,200 ounces.

Key Takeaways

• Record revenues of $254 million in 2024.
• Net income reached $19.2 million, or $0.12 per share.
• Strong cash position with $62.4 million in cash and equivalents.
• Stock price decreased by 3.13% in the latest session.
• 2025 production guidance set between 102,900 and 117,200 ounces.

Company Performance

Andean Precious Metals experienced a transformative year in 2024, doubling its size in terms of revenue and production. The company successfully integrated Golden Queen into its operations, contributing to its strong financial performance. The uplift to the Toronto Stock Exchange marked another milestone, enhancing its visibility and access to capital markets. InvestingPro analysis reveals that while analysts expect continued sales growth, the company faces challenges with its debt burden and cash management. For deeper insights into APM’s financial health and growth prospects, investors can access 15+ additional ProTips and comprehensive metrics through InvestingPro’s detailed research reports.

Financial Highlights

• Revenue: $254 million in 2024, a record high for the company.
• Net income: $19.2 million, translating to $0.12 per share.
• Adjusted EBITDA: $62.9 million.
• Free cash flow: $35 million despite $32 million in capital expenditures.

Outlook & Guidance

Looking ahead to 2025, Andean Precious Metals forecasts consolidated gold equivalent production between 102,900 and 117,200 ounces. The company plans to maintain its focus on operational efficiencies and exploration. Capital expenditures are expected to range from $28.2 million to $32 million, reflecting ongoing investments in operational improvements and potential growth opportunities.

Executive Commentary

CEO Alberto Morales described 2024 as a "truly transformational year" for Andean, highlighting the successful integration of Golden Queen. President Yohan Bouchard expressed optimism about the company’s exploration potential, emphasizing the "tremendous potential with Greenfield drilling."

Risks and Challenges

• Operational Costs: Managing operating cash costs at Golden Queen, projected between $1,500 and $1,800, remains a challenge.
• Market Volatility: Fluctuations in silver and gold prices could impact margins.
• Exploration Risks: The success of exploration activities and resource updates is uncertain.
• Foreign Exchange: Currency fluctuations, particularly the U.S. Dollar against the Bolivian Boliviano, could affect financial performance.
• Regulatory Changes: Any changes in mining regulations could impact operations.

Q&A

During the earnings call, analysts inquired about potential margin improvements at San Bartolome and the exploration strategy at Golden Queen. The management also discussed the ongoing share buyback program and the search for inorganic growth opportunities, indicating a proactive approach to enhancing shareholder value.

Full transcript - Aptorum Group Ltd Class A (APM) Q4 2024:

Conference Operator: Good morning, everyone, and welcome to the Andean Precious Metals Fourth Quarter and Year End twenty twenty four Results Conference Call. As a reminder, all participants are in a listen only mode. The conference is being recorded. After the presentation, there will be an opportunity to ask questions. At this time, I’d like to turn the conference call over to Amanda Mallow, Director, Investor Relations.

Please go ahead.

Amanda Mallow, Director, Investor Relations, Andean Precious Metals: Thank you, operator, and good morning, everyone. Before we get started, I would like to point out that during today’s call, we may make forward looking statements as defined under the Canadian Securities Law. I ask that you view our slide presentation for cautionary language regarding forward looking statements and the risk factors pertaining to these statements. Our press release, MD and A and financial statements are available on both SEDAR Plus and on our corporate website, andeanpm.com. With us presenting on today’s webcast is Alberto Morales, Andean’s Executive Chairman and CEO and Juan Carlos Sandoval, our CFO.

In the room with me, I have our new President, Yohan Bouchard Dom Kizek, our Vice President of Finance and Corporate Controller and Alex Pascual, our Director of FP and A, who will be available during the Q and A period. Following management’s formal remarks, we will open the call to questions. And with that, I’ll turn it over to Alberto.

Alberto Morales, Executive Chairman and CEO, Andean Precious Metals: Thank you, Amanda, and welcome, everyone. 2024 was a transformative year for Andy and Precious Metals. It marked our first full year with Golden Queen in our operating portfolio. And despite operating at close to the lower end of our production range, we achieved record revenues of $254,000,000 and a record adjusted EBITDA of $62,900,000 dollars Despite our capital expenditures in 2024 of $32,000,000 the company generated record free cash flow of $35,000,000 We delivered consolidated production of 106,287 gold equivalent ounces, which was just below the lower end of our gold and silver guidance, mainly due to a temporary suspension of the crushing and stacking activities at Golden Queen and lower production than expected from our tailings recovery program at San Bartolome. We’ll discuss the production in greater details later in this call, as well as our 2025 guidance.

A key milestone was our successful uplisting to the Toronto Stock Exchange. This achievement marks an important step in elevating Andean’s profile within the investment community, enhancing our access to capital markets and strengthening our position among leading mining companies. I’d like also to welcome our new President, Johan Bouchard, to our executive team. Johan brings with him a significant operational and strategic experience reinforcing our commitments towards improving our technical and operational excellence. Lastly, during the fourth quarter of twenty twenty four, no lost time injuries have been reported at Golden Queen or San Bartolome.

As of the end of the fourth quarter of twenty twenty four, San Bartolome reached one hundred and eighteen days without lost time injuries and Golden Queen reached five sixty one days without lost time injuries. We look forward to sharing further details on these results and answering your questions. With that, I will hand this over to Juan Carlos, who will walk you through our financials in greater detail.

Juan Carlos Sandoval, CFO, Andean Precious Metals: Thank you, Alberto. Good morning, everyone. As we turn to our financial performance this year, I’d like to emphasize the strength of our financial position and continued focus on value generation and growth. On a consolidated basis, MDN have record revenues of $254,000,000 with gross operating income of $68,600,000 and net income of $19,200,000 and $0.12 per share and adjusted EBITDA of $62,900,000 dollars and $0.41 per share on a diluted basis. 2024 was a strong year for cash flow generation, which can be seen with our strong balance sheet, which reported $62,400,000 in cash and cash equivalents and liquid assets of $81,600,000 as of December 2024.

We had a very strong period of free cash flow generation despite significant CapEx, particularly at Golden Queen. We had $31,600,000 in capital expenditures in 2024, which included a 4,700,000 at San Bartolome and $27,000,000 at Golden Queen. The majority of our CapEx was incurred at Golden Queen, particularly on upgrade on the upgrade of our mobile fleet. We believe these upgrades will provide for operational efficiencies in 2025 and thereafter. Moving on to our operating financial performance.

Q4 twenty twenty four silver equivalent production of 1,400,000 ounces, an increase over the prior year due to higher ore tons mill, improved average head grade and higher silver recovery rates. Full year 2024 silver equivalent production of 4,500,000 ounces, a small decrease from 2023, primarily due to lower ore tonne mill, partly offset by the improved grade and recovery rates. Revenue increased in Q4 and for the full year to $42,200,000 and $126,900,000 respectively, primarily driven by the high average realized silver prices and higher recoveries, partly offset by lower sales volume. Overall, Bolivian operational expenses have decreased on a quarter and year over year basis due to the strengthening of our U. S.

Dollar relative to the Bolivian Boliviano. We continue to see favorable conditions in the Bolivian Boliviano relative to the U. S. Dollar and expect these conditions to continue in 2025. Mining and ore purchase expenditures increased in Q4 and for the full year, reflecting the transition to exclusive ore purchasing and processing activities, which traditionally have lower margins as compared to typical mining activities.

Milling processing and indirect cost decline, benefiting from favorable foreign exchange conditions. Cash gross operating margin and gross margin ratio both increased in Q4 and for the full year to 11.0943.269.1538.41%, respectively, supported by higher realized silver prices and lower cost of sales per silver equivalent ounce. Capital expenditures decreased in Q4 and for the full year, primarily due to the commissioning of the fine deposit facility in Q2 twenty twenty four, reducing capital outlays for the remainder of the year. Moving on to Golden Queen. Q4 twenty twenty four gold equivalent production, 11,774 gold equivalent ounces, a decrease from Q3 twenty twenty four due to a temporary suspension of operations of the crushing and stacking activities in September 2024, which impacted gold production into Q4.

Revenue decreased in Q4 twenty twenty four compared to Q3 twenty twenty four, primarily due to lower gold equivalent production, partly offset by higher average realized gold prices. Mining and processing costs decreased in Q4 twenty twenty four due to lower consumables tied to reduced production. Operating cash cost and all in sustaining costs both declined in Q4 twenty twenty four compared to Q3 twenty twenty four, primarily due to lower cost of sales and lower sustaining capital, partly offset by lower gold and silver production. Capital expenditures declined in Q4 twenty twenty four as most of the company’s 2024 capital expenditure program was incurred in the first nine months of the year, particularly in Q3. Capital expenditure program included the replacement of most of the company’s hold truck fleet and the overhaul of existing mobile and fixed equipment.

Moving on to our 2025 guidance. Consolidated production. We anticipate consolidated gold equivalent production to be in the range of 102.9 to 117,200 ounces of gold equivalent. This represents a small increase to our 2024 gold equivalent production, representing higher recovery in San Bartolome and a more steady production environment with less equipment downtime at Golden Queen. Consolidated production.

We expect Golden Queen operating cash cost of $1,500 to $1,800 and all in sustaining cost of $19.50 dollars to $2,150 dollars San Bartolome cash gross operating margin of 6.58.4% and gross margin ratio of 29% to 36%. Total capital expenditures expected to range between $28,200,000 and $32,000,000 This includes sustaining capital of $18,300,000 to $20,200,000 and growth capital of $9,900,000 to $11,800,000 On San Bartolome, sustaining capital between 5,600,000 to $6,200,000 driven by tailings expansion and processing upgrade projects. At Golden Queen, sustaining CapEx between $12,700,000 to $14,000,000 dollars focused on stacking system and process plant equipment replacement, overhauls of existing equipment, upgrades to crushing equipment and growth capital between $9,300,000 to $11,000,000 focused on initial capital outlays for a new phase of the heap leach pad, purchase of new hold trucks and investment into a new production water well for future mine production. With this, this concludes the financial review of our Q4 and 2024 results. I will turn the call back over to Alberto for closing remarks.

Alberto?

Alberto Morales, Executive Chairman and CEO, Andean Precious Metals: Thank you, Juan Carlos. As mentioned in my initial remarks, 2024 was truly a transformational year for Ambient. We fully integrated Golden Clean into our operational portfolio, generated record revenue, adjusted EBITDA, generated significant free cash flow and strengthened our management team. We doubled the size of our company in many metrics such as revenues and production. All of these with zero dilution to our shareholders while increasing our liquid assets.

We look forward ahead for 2025. We remain focused on operational efficiencies, continuing our regional exploration efforts at Golden Queen, securing more ore purchases agreements at San Bartolome and inorganic growth opportunity as well. I am excited about the journey we’re on and we thank you for your continued support. We look forward to sharing more updates on our progress in the coming quarters. With that, I will hand the call back over to the operator for Q and A.

Juan Carlos Sandoval, CFO, Andean Precious Metals: Thank you. Operator?

Conference Operator: Thank you. At this time, we’ll begin the question and answer session.

Juan Carlos Sandoval, CFO, Andean Precious Metals: You.

Conference Operator: Our first question today comes from Justin Chan from SVP Resource Finance. Please go ahead with your question.

Justin Chan, Analyst, SVP Resource Finance: Hi guys. Thanks a lot for taking the questions and congratulations on another really strong quarter and a strong year. My first one is on San Bartolome. If I may, I think guidance after Q3 was updated to $7 CGOM and 30% margin and you did $11 SGOM, 43% margin in Q4 and you’re well above guidance for the year. So just looking at this year’s guidance, it’s for margins to come down a little bit.

I’m just curious, what are the moving parts? And if prices don’t change, kind of what to expect?

Juan Carlos Sandoval, CFO, Andean Precious Metals: Yes. Hi, Justin. Thanks for being on the call. Good morning. It’s JC.

Quickly, with respect to the CGOM, the main driver is obviously the sulfur price. And with respect to the gross margin ratio, the main driver is the Bolivian effect. Those are the main drivers for those two parameters.

Justin Chan, Analyst, SVP Resource Finance: Yes. Got you. So I guess if prices and FX don’t change, how would your margins look versus say the guidance that you put out today of $6.5 to $8.4 and 29 percent to 36%?

Juan Carlos Sandoval, CFO, Andean Precious Metals: Again, I think the it all depends on the Boliviano. As you know, it has been distancing itself from the official exchange rate. If that continues to be the case, we will continue to see the benefits from our local operating expenses. And then on the gross margin ratio, well, it will depend on where silver prices end up, right?

Justin Chan, Analyst, SVP Resource Finance: Got you. I can see the guidance is probably conservative. But for example, if we stay as we are now, would your numbers look more like they did in Q4 than maybe your guidance?

Juan Carlos Sandoval, CFO, Andean Precious Metals: Yes, I think you’re right. Justin, it’s a conservative approach, but with the caveats of where the silver price and the Boliviano currency rate will be.

Justin Chan, Analyst, SVP Resource Finance: Okay. Thanks. No, that’s helpful. Just because it’s yes, it’s been I mean, you definitely surprised the upside quite a lot last year, which is great. Just want to make sure that we’re kind of aware

Juan Carlos Sandoval, CFO, Andean Precious Metals: of what

Justin Chan, Analyst, SVP Resource Finance: to expect. Thanks. And then I guess on Golden Queen, if I could ask on your exploration plans and thoughts on when you might be expecting to update your resources and your mine plan?

Yohan Bouchard, President, Andean Precious Metals: It’s Johan here. I’m going to take that question. So I was at Golden Queen last week, and I see tremendous potential first with Guinfield Grilling to transfer maybe some stuff that we’re mining now into reserves and after that into reserves. So this is great news, I think. And on the exploration perspective, we have very, very good targets.

We received some really premises results as well. So we’re still developing an exploration strategy for this year based on that, making sure that we align with business continuity at Golden Queen. And hopefully, we’re going to be able to give you some more color on that strategy in the next quarter call.

Justin Chan, Analyst, SVP Resource Finance: Okay, thanks. But in terms of I guess that exploration strategy, is that accounted for in your capital guidance in terms of like have you allocated funds for exploration in this budget?

Yohan Bouchard, President, Andean Precious Metals: We did. We did, absolutely. But I mean, we may I mean, by looking at all that, we may ask for more funds, I mean, if we believe that the return is quite quick.

Justin Chan, Analyst, SVP Resource Finance: Yes, absolutely. Okay. And conceptually, what would be I know you have to review, but is it something that could be updated this year? Is it more likely next year? Just trying to get it set.

Yohan Bouchard, President, Andean Precious Metals: I guess, we’re going to come back to you about that. I mean, we would still have to do some more. But again, this is an active conversation here and the goal would be to give some news on expiration within the next, I would say, a few quarters.

Justin Chan, Analyst, SVP Resource Finance: Okay, great. Thanks. And maybe just one last one. You’ve built a very strong balance sheet. You took on a bit of debt to acquire Golden Queen.

You’ve now generated quite a lot of cash and you’re back in that cash position. What’s your thoughts on capital allocation? I know growth is a priority. You have a share buyback. Just can you give us a sense of what to expect?

Alberto Morales, Executive Chairman and CEO, Andean Precious Metals: Yes, Justin. Hi. Let me tackle that one. Definitely, we have as you know, we’ve been publicizing every month the amount of shares that our NCIB program is purchasing in the buyback. It’s been conservative this year.

So we’re still using our cash. We believe that at this levels, it’s a very good use of our cash to start doing some of our shares buyback. That’s number one. And with respect to the growth, inorganic growth, we’re still actively looking for inorganic growth in connection with potential targets that we can try to see under current market conditions as well. So we intend to continue building our, let’s just call it, award chest in the balance sheet for those purposes.

I think the sustaining and growth capital expenditures are basically really, really good because what we would like to accomplish is we would like to accomplish some of the investments this year to try to in a way improve efficiencies going forward.

Justin Chan, Analyst, SVP Resource Finance: Yes. Got you. All right. Thanks very much. Thanks, Alberto, Johan and JC.

I’ll free up the line. Thanks very much.

Alberto Morales, Executive Chairman and CEO, Andean Precious Metals: Thank you.

Conference Operator: Our next question comes from Ben Parikh from Atrium Research. Please go ahead with your question.

Ben Parikh, Analyst, Atrium Research: Hi, guys. Congrats on a great Q4 in 2024. Just a couple of quick questions here. Could you just expand on the CapEx spend at Golden Queen? What impact the initiatives from 2024 will have on 2025 production and operations?

And then going forward, the CapEx spend in 2025, what kind of effect that will have over the long term?

Juan Carlos Sandoval, CFO, Andean Precious Metals: Yes, this is JC Heibern. Thanks for being on the call. So this is a capital expenditures program we started last year. We are fully this year, we will complete the full replacement of our haul trucks. We’re also starting this year to build our new pad that will start to be used late next year.

And overhauls, it’s the continuation of that revamping of most of our mobile equipment. I think the majority of the CapEx being allocated this year are within those three concepts, Ben.

Ben Parikh, Analyst, Atrium Research: Okay. Thank you. And then on the equipment, what kind of efficiencies can that bring to the operation and production specifically around costs or production throughput increasing?

Juan Carlos Sandoval, CFO, Andean Precious Metals: Yes, that’s a good question. For example, with respect to the whole trucks, we’re getting obviously more efficient, bigger beds, more fuel efficient. We’re also working the design to better improve the distance between the bid and the crusher. So we do expect some good efficiencies from getting those new trucks. Obviously, the major overhauls, the required maintenance will be much lower.

So we do expect not only efficiencies, but cost savings down the road.

Ben Parikh, Analyst, Atrium Research: Yes, understood. Looking forward to seeing that. And then moving over to San Bartolome, can you explain the decrease in tons milled in 2024 compared to 2023? And then if it’s anything material, what have you guys done to make sure that production remains steady through 2025?

Juan Carlos Sandoval, CFO, Andean Precious Metals: Yes. So bear in mind that in December, in late twenty twenty three, we decided to stop mining from our own deposit. As you know, it was depleting and we decided to free up that capacity in our plan for better ores that we could buy locally in Bolivia. So I think that had an impact compared to 2023. And also we had, I would say, as we mentioned on our opening remarks, we had a lower production on our tailings recovery.

And we are working on trying to improve those that production from the tailings this year. I think those two are the main impacts if we compare 2023 to 2024 on production.

Ben Parikh, Analyst, Atrium Research: Okay. Okay. Thank you. And then last question is around margins with silver and gold, the price being so high. Are we expecting margins to compress at all just given your ore sources are able to send lower grade ore and still be processed profitably?

Or are you guys maintaining a certain grade at San Bartolome?

Juan Carlos Sandoval, CFO, Andean Precious Metals: Well, I think with respect to the strong silver prices, we might, yes, see, we’re going to be paying more in some cases for the ore we buy because it’s a formula based on international prices. But at the end, we’ll as we have always said, as in processing facility, we always go end up for the refining margin, right? So it could happen, squeeze a little bit margins, yes, but we will always have that spread. We believe we’ll have that spread.

Ben Parikh, Analyst, Atrium Research: Yes, understood. Okay, thanks JC. That’s all I have for today.

Juan Carlos Sandoval, CFO, Andean Precious Metals: Thank you, Ben.

Conference Operator: And ladies and gentlemen, with that, we’ll be closing today’s question and answer session. I’d like to turn the floor back over to Alberto Morales for any closing remarks.

Alberto Morales, Executive Chairman and CEO, Andean Precious Metals: Thank you, operator, and I want to thank everyone for joining us today. We remain committed to driving our business forward and look forward to sharing our progress in the quarters ahead. Thanks again and have a great day.

Conference Operator: And ladies and gentlemen, with that, we’ll conclude today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

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