Earnings call transcript: Andean Precious Metals sees 44% revenue rise in Q1 2025

Andean Precious Metals Corp (APM), with a market capitalization of $6.42 million, reported a robust financial performance for the first quarter of 2025, with consolidated revenue increasing by 44% year-over-year to $62 million. The company also saw a significant improvement in net income and adjusted EBITDA. According to InvestingPro analysis, the stock currently trades at an attractive 0.29 times book value, suggesting potential undervaluation. Despite the strong earnings results, the stock price remained relatively stable, with a modest 1% increase. The company is optimistic about future growth, backed by exploration and strategic initiatives.

Key Takeaways

• Revenue for Q1 2025 rose by 44% compared to the previous year.
• Net income reached $14.6 million, translating to $0.10 per diluted share.
• Adjusted EBITDA surged to $21.9 million from $1 million in Q1 2024.
• The company maintained a strong balance sheet with liquid assets totaling $75.7 million.
• Focus on exploration and strategic mergers and acquisitions to drive future growth.

Company Performance

Andean Precious Metals demonstrated a solid start to 2025 with a significant increase in revenue and profitability metrics. The company’s strategic focus on higher-grade ore zones and cost management contributed to its improved performance. InvestingPro data shows the company maintains a "Fair" overall Financial Health Score of 2.19, with particularly strong scores in growth potential. The transition to the TSX main board and advancements in its exploration program further position the company for future growth. Investors can access detailed analysis and 10+ additional ProTips through InvestingPro’s comprehensive research report.

Financial Highlights

• Revenue: $62 million, a 44% increase year-over-year.
• Net Income: $14.6 million, or $0.10 per diluted share.
• Adjusted EBITDA: $21.9 million, up from $1 million in the previous year.
• Liquid Assets: $75.7 million, compared to $61.4 million a year ago.
• Cost of Sales: Decreased by 10% to $36 million.
• Gross Operating Income: Increased to $23.1 million from $0.3 million.

Outlook & Guidance

Andean Precious Metals remains positive about its growth trajectory, expecting a production ramp-up in the second quarter and stronger results in the second half of 2025. InvestingPro analysis reveals that management has been actively buying back shares, demonstrating confidence in the company’s future. The company has set a full-year capital expenditure guidance of $28-32 million and plans to update its technical report by Q2 2026. With the next earnings announcement scheduled for June 13, 2025, and analysts maintaining a "Strong Buy" consensus, exploration efforts continue to focus on extending the Golden Queen mine life.

Executive Commentary

Alberto Morales, CEO of Andean Precious Metals, emphasized the company’s strategic direction, stating, "We are well positioned to continue building on this momentum." He further highlighted the importance of exploration, saying, "Our exploration remains a critical pillar of our strategy." Morales also noted, "We are evaluating potential acquisitions that align with our long-term goals."

Risks and Challenges

• Market Volatility: Fluctuations in gold and silver prices could impact revenue.
• Exploration Risks: Uncertainties associated with extending mine life at Golden Queen.
• Operational Costs: Potential increases in production costs could affect margins.
• Regulatory Changes: Changes in mining regulations could pose compliance challenges.
• M&A Integration: Potential challenges in integrating acquisitions could impact growth.

Q&A

During the earnings call, analysts inquired about the stability of working capital and the expected production ramp-up at Golden Queen. The company confirmed stable working capital expectations and attributed the production increase to higher volumes at Golden Queen. Additionally, the exploration database cutoff was discussed, set for September 1, as part of ongoing resource and reserve evaluations.

Full transcript - Andean Precious Metals Corp (APM) Q1 2025:

Conference Operator: Good morning. Welcome to Andean Precious Metals First Quarter twenty twenty five Results Conference Call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Dom Kaiser, Vice President of Finance.

Please go ahead.

Dom Kaiser, Vice President of Finance, Andean Precious Metals: Thank you, operator, and good morning, everyone. Fortunately, Amanda Malo was off this morning due to an illness, and I’m filling in as host for this call. Before we get started, I would like to point out that today’s 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 risk factors pertaining to these statements. Our press release, MD and A and financial statements are available both on SEDAR plus and on our corporate website, andianpm.com.

With us on today’s webcast is Alberto Morales, Andean’s Executive Chairman and CEO Johan Bouchard, Andean’s President and Juan Carlos Sandoval, our Chief Financial Officer. Following management’s formal remarks, we will then open the call to questions. And now over to Alberto.

Alberto Morales, Executive Chairman and CEO, Andean Precious Metals: Thank you, Don, and welcome everyone. I am pleased to report that Andean delivered a strong start to 2025. In the first quarter, we generated consolidated revenue of 62,000,000 a 44% increase over Q1 of last year, driven by higher realized gold and silver prices and a solid production performance across both of our operations. We produced 21,361 gold equivalent ounces in the quarter, slightly ahead of Q1 twenty twenty four. And more importantly, our gross operating income grew significantly to MXN23.1 million compared to just MXN0.3 million in the same period of last year.

This strong operating performance flow through the bottom of the line, resulting in a net income of $14,600,000 or $0.10 per share on a diluted basis. Our balance sheet remains a real strength. We ended the quarter with $75,700,000 in liquid assets, up from $61,400,000 a year ago, while also reducing total liabilities compared to end of the year 2024 by $8,900,000 In addition to these financial achievements, we continue to deliver on several strategic initiatives. We completed our graduation to the TSX main board in January, reflecting the growing scale and maturity of our business. We also announced positive exploration results at Golden Queen, which we are already shaping our 2025 exploration plans as we work to extend the mine life, which we will touch on later on this call.

Finally, we strengthened our leadership team with the incorporation and appointment of Jo Anne Bouchard as President of the company. Overall, it was a very strong start to the year, and we are well positioned to continue building on this momentum. With that, I will now turn this over to Johan to walk you through the operational results in more detail. Well, thank you, Alberto, and

Johan Bouchard, President, Andean Precious Metals: good morning all. So gold equivalent production in Q1 was 21,361 ounces, a slight increase from the same period of last year. The production increase is driven by higher production at San Bartolome, which is partially offset by slightly lower gold equivalent production at Golden Queen. Revenue for Q1 twenty twenty five is $62,000,000 a significant increase comparison to 43,100,000.0 in Q1 twenty twenty four, largely driven by higher average realized gold and silver prices and increased sales volume. Better cash gross operating margin at San Bartolome is driven by favorable foreign exchange currency, better processing recovery and higher throughput.

Lower operating cash costs at Golden Queen in comparison to the same period of last year is due to the deferred stripping which is allocated to the sustaining CapEx and cost allocation to growth capital for the construction of an optimized main haul road. Higher all in sustaining costs in comparison to the first quarter of last year is due to the stacker replacement cost, improvements to the crusher circuits and overall on production equipment. Looking at our operations, I will begin by sharing some by sharing an update on San Bartolome where we see notable increase of production and better costs. Historically, Q1 is the slowest quarter for San Bartolome due to the seasonal weather condition impacting the operations. Gold equivalent production for Q1 twenty twenty five was 10,172 ounces, driven by higher mill throughput.

Higher silver recovery and higher gold grade partially offset by lower silver grade in comparison to the same period of last year. Operating expenses were positively impacted by favorable foreign exchange reflecting lower cost of sales. Revenue increased significantly compared to Q1 twenty twenty four largely due to higher average realized silver price and the gold and silver production increase. Net inventory movements in Q1 twenty twenty five can be explained by the timing of gold and silver sales at the beginning and the end of the period. Capital expenditures are lower due to the completion of the fine deposit facility construction in the first half of twenty twenty four.

Overall, we continue to demonstrate a strong cash operating performance with an increase in cash gross operating margin and gross margin ratio reflecting higher silver price and better operating costs. Now turning to Golden Queen. So gold equivalent production for Q1 twenty twenty five was 11,189 ounces, which is aligned with the first quarter of twenty twenty four. On an operational perspective, total tonnes mined is lower than the same period of last year, while the stacking rate is higher, which is due to the mining sequence and the stacking capacity. The stacker was replaced at the end of the quarter and increasing stacking performance is anticipated over the next couple of quarters.

In the first quarter, gold inventory increased at the leach pad, which is expected to be recovered in the upcoming quarters. Revenue increased over Q1 twenty twenty four driven by higher average realized gold and silver prices, more than offsetting higher capital expenses in comparison to the first quarter of last year. As mentioned previously, lower operating cash cost can be explained by deferred stripping costs and costs allocated to grow capital regarding the construction of the optimized All In Road, which should be complete in the second quarter. The new All Road will significantly decrease the cycle time and subsequently the all in costs. The higher all in sustaining costs is used as a factor replacement cost and timing related to the maintenance on fixed and mobile equipment with the objective of decreasing operating costs.

On the following slide, I would like to touch on our 2024 exploration activities at Golden Queens and our plan for 2025. As we shared on 05/01/2025, we’re pleased with the progress on our exploration program as we look to extend the life of mine at our Golden Queen operation. Our exploration focus remains on expanding the current mining zone on the south side of the open pit with the ultimate objective of increasing the life of mine. The key highlights from our 2024 exploration program are the following. We complete 29 shallow infill reverse circulation drill holes 4,617 meters.

This included work in the Silver Queen Southeast trend and Alpha Sun, confirming the geological model and validating our approach for the next phase of core drilling. We drilled 23 core holes totaling 4,123 meters and successfully intersect gold and silver in all 23 holes. The objective were to increase mineral resource and reserves in the Silver Queen, Southeast and Alpha San area as well as to test the Hilltop geological continuity. Here are some notable results. At Silver Queen Southeast, 12 core holes extended demerrillization by 100 meters on strike including OLS Q24-six with 1.67 grams per tonne of gold over 5.5 meters.

At Tulsafan, Seven core holes including AL240-two intersecting 0.88 grams per ton of gold over 93 meters. And finally at Hilltop, 4 core holes including SQ24-twelve which returned 1.67 grams per ton of gold over six meters starting at only 18 meters from surface. These results confirm our positive view on Golden Queen’s exploration potential. We are very pleased with the Hilltop area, which provides short term mining flexibilities. In fact, we anticipate first ore from Hilltop in Q3 twenty twenty five.

Now for 2025, we have allocated an initial budget of $2,800,000 to continue with the exploration strategy, focusing on reserve and resources development. The program includes 4,267 meters of drilling in the Silver Queen Southeast Extension, Delta and Alpha Sun area. We plan to release more exploration results in the second half of twenty twenty five and we will update our Golden Queen technical report in the second quarter of twenty twenty six. With that, I will now turn the call over to JC to take you through the financial highlights. JC?

Juan Carlos Sandoval, Chief Financial Officer, Andean Precious Metals: Thank you, Johann, and good morning everyone. Let’s go over the key financial highlights for the first quarter of twenty twenty five. Revenue for Q1 twenty twenty five totaled $62,000,000 a 44% increase from 43,100,000.0 in Q1 twenty twenty four driven by higher average realized gold and silver prices and increased production. Cost of sales decreased by 10% to $36,000,000 from $40,100,000 in Q1 twenty twenty four, mainly due to the disciplined cost management, improved productivity and favorable exchange rates at San Bartolome. Gross operating income increased significantly to $23,000,000 from $312,000 in Q1 twenty twenty four, reflecting the higher revenue and improved cost structure.

Net income for the quarter was $14,600,000 or $0.10 per share compared to a net loss of $76,000 or $0 per share in Q1 twenty twenty four. Adjusted EBITDA was $21,900,000 up from just $1,000,000 in the prior year reflecting strong operating performance. Free cash flow improved to negative $1,500,000 an improvement from negative $8,100,000 in Q1 twenty twenty four, thanks to better operating cash flows, partly offset by higher capital expenditures. Capital expenditures were $9,400,000 up from $3,400,000 in Q1 twenty twenty four as we continue to reinvest in our operations particularly at Golden Queen. Cash and cash equivalents were $53,100,000 at the end of the quarter, up from $41,500,000 year over year reflecting strong cash flows from operations.

We continue to demonstrate a very strong balance sheet. During Q1 twenty twenty five, we made improvements in our net asset and net liability positions with significant accounts payable and tax payments all while maintaining a strong cash and liquidity position. Liquid assets are metric when looking at our total cash and investments less our line of credit was $75,600,000 as of Q1 twenty twenty five versus $61,400,000 at the end of Q1 twenty twenty four. And now I’ll hand it over to Alberto for closing remarks.

Alberto Morales, Executive Chairman and CEO, Andean Precious Metals: Thank you, JC. As we discussed earlier, exploration remains a critical pillar of our strategy. We are encouraged by the progress of our 2024 drilling campaign at Golden Fin, where we’ve seen promising results that could significantly expand our resource base and enhance the mine life. Our exploration team continues to target high potential areas, and we are committed to advancing these efforts through 2025. Our approach to capital allocation remains disciplined, with a clear focus on investments that drive long term growth and improve operational efficiency.

We are prioritizing the continued development of Golden Queen and San Bartolome as well as key exploration projects that present the highest return potential. Looking ahead, we expect production to ramp up in Q2 with steady and sustainable production levels in the second half of the year. As previously communicated, we are maintaining our full year guidance and we anticipate stronger results in the later half of 2025. A key part of our growth strategy includes seeking strategic M and A opportunities to further enhance our portfolio. We are evaluating potential acquisitions that align with our long term goals and can add significant value to the company.

These opportunities could enable us to expand our resource base and improve our operational footprint, all while continuing to maintain our disciplined approach to capital allocation. With that, I now would like to turn the call over to the operator and open the floor for questions. Operator?

Conference Operator: Thank The first question comes from Justin Chan with SCP Resource Finance. Please go ahead.

Justin Chan, Analyst, SCP Resource Finance: Hi, guys. Thanks very much for the update. My first question is just regarding so I think this Q1 was pretty in line on operating metrics. There’s just some difference between, let’s say, EBITDA and operating cash flow just on working cap. Could you talk us through, I guess, the changes there on inventory and capabilities?

And do you expect that to unwind through the year? Or is your current working capital levels where you expect them to stay?

Juan Carlos Sandoval, Chief Financial Officer, Andean Precious Metals: Thank you, Justin. I think from a working capital perspective, I think we’re pretty much in line. I think that’s what we expect to see throughout the year. And I guess with respect to the inventory levels, guess the same pretty much stable. We can get back to you on that, but I would assume they would remain pretty much stable as they are right now.

Justin Chan, Analyst, SCP Resource Finance: Okay, got you. Thanks. And then just in terms of the improvement through the year, I guess, could you just maybe talk through, I guess, it’s San Bartolome, is that are there any key factors driving that there or is San Bartolome more steady through the year and then at Golden Queen is that mainly driven by the grade profile?

Johan Bouchard, President, Andean Precious Metals: Yes, got answered that Justin. At Sandbart, the increase in production is mostly driven by grade quarter over quarter and at Sandbart is by I would say stacking performance.

Justin Chan, Analyst, SCP Resource Finance: Got you. So Sandbart is really Yes.

Johan Bouchard, President, Andean Precious Metals: So sorry about that. Sandbart is going to be it’s more about grade. And Golden Queen is more about the stacking performance. Sorry about that.

Justin Chan, Analyst, SCP Resource Finance: Okay. Yes, that makes sense. Was trying to immensely wrap. It’s like stacking at Sandbart as maybe I need to rethink the operation. Okay.

So it’s going to be volume driven, essentially more volume through the year at Golden Queen and at Sandbar, it’s more grade That’s correct. Got you. Thanks. And then in terms of updating your resource and mine plan, what’s for it? I guess, on your current exploration budget, what’s your thinking on timing there?

Johan Bouchard, President, Andean Precious Metals: Yes. So what we did basically is we compiled the drilling campaign of 2024 in our new model. It’s almost done. We’re evaluating it now. Hopefully, we’re going to do we’re going to we’re trying to fast track our exploration campaign this year to, I would say, add much more as we can information for the new reserve and resources update that we’re planning to start September to have it ready by year end.

But yes, overall, everything is balancing well. And based on that, we’re looking at producing a technical report. So but yes, I’m really pleased with the results that we have. So I mean, on the legal aspect, it’s done really well. And actually, on the operational aspect as well, I mean, we’re making good progress at Golden Queen.

Justin Chan, Analyst, SCP Resource Finance: Got you. So effectively, the cutoff date for drilling will be maybe something like September and then

Johan Bouchard, President, Andean Precious Metals: results will be effective in Yes, we’re planning close the you’re planning to close the database on September 1 and after that do the work and have everything ready to have everything, I would say, the technical report aligned with our year end reserve and resources.

Justin Chan, Analyst, SCP Resource Finance: Got you. And from what you see, how sensitive is it to pricing and how much of a consideration is that as you kind of look at what the update?

Johan Bouchard, President, Andean Precious Metals: We’re not there yet.

Justin Chan, Analyst, SCP Resource Finance: We’re not

Johan Bouchard, President, Andean Precious Metals: there No, we’re not there yet. Mean, we’re just we’re still working on basically what we’re doing now, we’re using pretty much the same gold and silver price that we had before and we’re going to adjust all that in time.

Justin Chan, Analyst, SCP Resource Finance: Okay, great. Thanks very much. I realize I’ve asked quite a few, so I’ll free up the line and then rejoin if there’s time The

Conference Operator: next question comes from Allison Carson with Desjardins. Please go ahead.

Allison Carson, Analyst, Desjardins: Thanks. Good morning, everyone, and thanks so much for taking my questions today. My first question is on CapEx at Golden Queen. In terms of spending for the remainder of the year, is CapEx expected to be lighter in H2 or should it be pretty even over the remaining three quarters?

Juan Carlos Sandoval, Chief Financial Officer, Andean Precious Metals: Hi, Allison. So, yes, we’re sticking as Alberto mentioned, we’re sticking to our guidance, which is between 28,000,000 and $32,000,000 Most of it is will be headed to Golden Queen of which around 12 to 14 on sustaining and nine to 11 on growth. Yes, it’s mostly front ended as you’ve probably seen. We already invested $9,000,000 this quarter. So I think for specifically on Golden Queen, it’ll be roughly around $4,000,000 in sustaining CapEx per quarter for the rest of the year.

Allison Carson, Analyst, Desjardins: Okay, great. And then in terms of exploration at Golden Queen, are there any areas you’re particularly excited about for the 2025 program and could your initial budget be increased based on drilling success? And then just finally, how are you thinking about exploration beyond the revised technical report next year? Will drilling be focused more just on reserve replacement? Or do you expect to do more exploration based drilling as well on an annual basis?

Johan Bouchard, President, Andean Precious Metals: I think that’s the idea is really to focus on Alpha Sun and the, I would say, all the south section to extend the deposits in that direction. We saw that Hilltop Zone is expanding the current pit to about by about 100 meters and strike. Overall, I mean, So we’re going continue to explore that zone with the objective of increasing reserves. That’s the main idea, increasing life of mine and starting really by, I would say, nearby by the already, I would say, the pit design is and extending on the south side. And I would say, Paso is quite interesting as well.

This is kind of a new zone. We do have some reserve and resources there. But it seems like we the model that we have is I mean, the drilling, the campaign that we designed brings some really good results. So we’re really happy about that. But I would say to increase reserves, we’re going to more focus on extending the south side of open pits.

Conference Operator: The next question comes from Ben Peary with Atrium Research. Please go ahead.

Ben Peary, Analyst, Atrium Research: Hi, Alberto and JC. Congrats on a great quarter beating our estimates pretty broadly across the board. Most of my questions have been answered, but just on Queen with regards to the operating cash costs coming lower than our expectations, should we expect this to continue into Q2 and the rest of the year? You sort of mentioned it had to do primarily with the stacker being replaced. And so I would assume that that’s going to continue over the next few quarters here?

Juan Carlos Sandoval, Chief Financial Officer, Andean Precious Metals: Yes. I think Ben, that’s correct. I think same things. I think we’re well within the guidance of ’15 hundred eighteen hundred. Right now, it’s been more on the low side of the guidance.

So we’re very comfortable with confirming that range.

Ben Peary, Analyst, Atrium Research: Okay, great. Thank you. And moving over to St. Bart, obviously or St. Bart, excuse me.

Obviously, the gold price is still continuing higher. How do you expect your ore sourcing to change? Will you be receiving lower grade material now that the prices are higher and therefore will margins compress? Or how do you expect margins to continue throughout the year as gold continues higher here?

Alberto Morales, Executive Chairman and CEO, Andean Precious Metals: Yes. Let me respond to that. In San Bartolome, we’re actually pursuing different sites that our exploration team is looking at so that we are trying to look for higher grade zones. It is one of our main purposes of San Bartas. It was explained before by Jovan that results in San Bartas is going to be mostly driven by higher average silver grades.

So we’re focusing on that. Obviously, having said that, to the extent that we still find ore that it’s not as high as we were expecting. The higher current spot prices also certainly would motivate us to continue increasing the throughput in there as we can now be more flexible in getting maybe some lower grades that we wouldn’t have otherwise taken. But it is our intent to focus primarily on trying to secure higher grade ore by sending our exploration and geologists team to search for new areas around the vicinity of the plant.

Ben Peary, Analyst, Atrium Research: Okay. Thank you. And sort of jump back to Golden Queen, but I figure I’ll ask this quickly. Just on what Justin sort of touched on and how production ramps pretty significantly from Q1 through into the back half of the year. You mentioned it’s mainly volume driven in terms of that ramp.

Do we expect that to continue into Q1 of next year? Or will things sort of settle back down to what we sort

Johan Bouchard, President, Andean Precious Metals: of saw in Q1 of this year from a production What we see based on our mine plan is we see our ramping up in Q2 and Q3 to stabilize in Q4 and going forward. That’s what we see in our mine plan.

Ben Peary, Analyst, Atrium Research: Okay. Amazing. Thank you, That’s all I had today. Okay.

Conference Operator: We have a follow-up question from Justin Chan with SCP Resource. Please go ahead.

Justin Chan, Analyst, SCP Resource Finance: Hi, guys. Just one on San Bartolome. As is quite frequently the case, your margins are running well above your guidance. I’m just curious if everything stays the same on pricing and FX, what is your thinking there? Would this would your current margins in Q1 be what you would expect to stay?

Juan Carlos Sandoval, Chief Financial Officer, Andean Precious Metals: Justin, it’s dependent always dependent on two things, prices and then the Boliviano. Has an important impact on margins. So it will depend mostly on that I would say.

Justin Chan, Analyst, SCP Resource Finance: Got you. But I guess if you assume neither of those change from this point onward is your margin in Q1 a fairly representative number?

Juan Carlos Sandoval, Chief Financial Officer, Andean Precious Metals: Yes, yes, agree. I think it’s a good average if you want to take it like that.

Justin Chan, Analyst, SCP Resource Finance: Yes. Okay. All right. Great. Thanks very much.

That’s all I had. Thanks guys.

Conference Operator: This concludes the question and answer session. I would like to turn the conference back over to Alberto Morales for any closing remarks. Please go ahead.

Alberto Morales, Executive Chairman and CEO, Andean Precious Metals: Thank you, operator, and thanks you all for joining us today. We are very pleased with our Q1 twenty twenty five results. With a strong balance sheet and experienced leadership team now in place and a clear growth strategy to drive the business forward, we’re well positioned to pursue our vision of transformational growth into a mid tier producer. Thanks again for joining and have a great day.

Conference Operator: This brings to close today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

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