Earnings call transcript: Torex Gold Q2 2025 miss impacts stock

Torex Gold Resources Inc. (TXG) reported its Q2 2025 earnings, revealing a miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of $0.50, falling short of the forecasted $0.5413, which represents a 7.63% negative surprise. This miss was reflected in the stock’s after-hours trading, where it declined by 0.86%, closing at $42.08. InvestingPro data shows three analysts have recently revised their earnings estimates downward for the upcoming period, suggesting continued headwinds. Despite robust margins and positive free cash flow in June, the company faces challenges with higher all-in sustaining costs due to lower production levels.

Key Takeaways

• Torex Gold’s Q2 2025 EPS missed expectations by 7.63%.
• Stock price fell by 0.86% in after-hours trading.
• The company achieved its first positive free cash flow month in June.
• Production guidance remains at 400,000-450,000 ounces for the year.
• The Medialuna project achieved commercial production.

Company Performance

In Q2 2025, Torex Gold produced 83,000 ounces of gold equivalent, bringing year-to-date production to 142,000 ounces. The company reported a cash position of over $100 million but faced a net debt of $226 million as of June 30. According to InvestingPro analysis, the company operates with a moderate debt level, maintaining a healthy current ratio of 5.37. Despite higher all-in sustaining costs, Torex Gold maintained a robust margin of 42% year-to-date, supported by an impressive gross profit margin of 68.36%. The Medialuna project marked a significant milestone, achieving commercial production on May 1, with processing capabilities ramping up significantly.

Financial Highlights

• Revenue: Not disclosed, but missed forecasts.
• Earnings per share: $0.50, down from the forecasted $0.5413.
• Cash position: Over $100 million.
• Net debt: $226 million as of June 30.
• Free cash flow: Positive $44 million in June.

Earnings vs. Forecast

Torex Gold’s Q2 2025 EPS of $0.50 missed the forecast of $0.5413, resulting in a 7.63% negative surprise. This miss can be attributed to higher all-in sustaining costs and lower production levels, which impacted the company’s profitability.

Market Reaction

Following the earnings announcement, Torex Gold’s stock declined by 0.86% in after-hours trading, closing at $42.08. This movement reflects investor sentiment in response to the earnings miss and the challenges highlighted in the company’s cost structure. Based on InvestingPro’s Fair Value analysis, the stock appears undervalued at current levels, presenting a potential opportunity for value investors. The stock remains within its 52-week range, with a high of $49.25 and a low of $20.02. InvestingPro subscribers have access to detailed valuation metrics and 8 additional ProTips that provide deeper insights into TXG’s investment potential.

Outlook & Guidance

Torex Gold maintained its annual production guidance of 400,000-450,000 ounces but expects to be at the lower end of this range. The company increased its non-sustaining capital expenditures to $160-170 million. Torex is targeting its first positive quarterly free cash flow in Q3 and anticipates a preliminary economic assessment for the Los Reyes project by mid-2026.

Executive Commentary

Jody Gisanko, President and CEO, stated, "We finally turned the corner on free cash flow. June was our first positive month and quarter three very much tracking to be our first positive quarter." Gisanko also emphasized the company’s commitment to exploration and development, noting, "We remain very much committed to... not thinking that M&A and capital returns are exclusive propositions."

Risks and Challenges

• Higher gold prices impacting all-in sustaining costs.
• Operational challenges with transitioning to 100% underground mining.
• Delays in paste plant commissioning, now expected to be operational in August.
• Economic volatility affecting metal prices and market conditions.
• Increased non-sustaining CapEx, which could pressure financial flexibility.

Q&A

During the earnings call, analysts inquired about the timeline for the paste plant commissioning, which has faced slight delays but is expected to begin operations in August. Questions also focused on the company’s exploration efforts at ELG Underground and Media Luna West, as well as potential acquisitions to complement the current portfolio. Executives expressed optimism about mine planning and future growth opportunities.

Full transcript - Torex Gold Resources Inc (TXG) Q2 2025:

Conference Operator: Thank you for standing by. This is the conference operator. Welcome to the Torex Gold Second Quarter twenty twenty five Results Conference Call and Webcast. As a reminder, all participants are in a 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 Dan Rollins, Senior Vice President, Corporate Development and Investor Relations. Please go ahead.

Dan Rollins, Senior Vice President, Corporate Development and Investor Relations, Torex Gold: Thank you, operator, and good morning, everyone. On behalf of the Torix team, welcome to our Q2 twenty twenty five conference call. Before we begin, I wish to inform listeners that a presentation accompanying today’s conference call can be found under the Investors section of our website at www.torusfold.com. I’d also like to note that certain statements to be made today by the management team may contain forward looking information. As such, please refer to the detailed cautionary notes on Page two of today’s presentation as well as those included in the Q2 twenty twenty five MD and A.

On the call today, we have Jody Gisanko, President and CEO and Andrew Snowden, CFO. Following the presentation, Jody, Andrew and I will be available for the question and answer period. This conference call is being webcast and will be available for replay on our website. Last night’s press release and the accompanying financial statements and MD and A are posted on our website and have been filed on SEDAR plus Also note that all amounts mentioned in this call are U. S.

Dollars unless otherwise stated. I’ll now turn the call over to Jody.

Jody Gisanko, President and CEO, Torex Gold: Thank you, Dan, and good morning to all on the line. We’ll take you through the detailed results over the next minutes of course, but I wanted to open this call with some high level commentary about the quarter. In some ways, quarter two was exactly what we wanted. Our safety performance was impeccable. We had no lost time injuries in the quarter and we made very good progress on our next level safety program, including continued implementation of the fatal risk standards and critical controls first in our underground operations and then over the surface facilities.

Second and importantly as planned, we declared commercial production at our Medialuna project on May 1, which is a major milestone for the organization. You can take from this that the process plant ramped up through the first part of the quarter as expected as did the Medialuna mine, both good news. And notably in June and July, we announced two M and A transactions back to back. The all cash acquisition of Reyna Silver and the all share acquisition of Prime Mining. Really this is years worth of work coming together within a month of one another.

Dan will provide more details on this shortly. Now, all that said in other ways, the quarter was not what we wanted at all. Even though ramp up at the process plant was tracking very well through the May, at the end of the month, we had a capacitor failure electrical house that feeds the variable frequency drives of the ball mill. This took us down for ten days while we sourced a replacement from Europe. So production was not what we wanted it to be at all.

It came in at 83,000 ounces of gold equivalent for the quarter and 142,000 ounces year to date. This means that for the first time in years, we’re going be on the back foot here to deliver annual production guidance of 400,000 to 450,000 ounces. We think we can do it. We’ve got a plan to do it, but we have our work cut out for us for sure. This disappointing production result and the fact that the Medelluna mine is still in ramp up translated into what I would describe as forgettable performance on all in sustaining costs.

Andrew will take you through that in his section. And finally, on non sustaining CapEx, we’ve had to adjust annual guidance upwards by $70,000,000 for various reasons I’ll describe later in the call. But largely, it’s a reflection of the extended project period from the delays we encountered late last year and a ramp up plan that has us maintaining aggressive development rates at Mediluna underground to achieve that 7,500 tonnes per day six months ahead of the schedule we set out for ourselves in the technical report. All of that said, we look forward and there’s plenty to look forward to here. With the May downtime behind us, June and July production at the process plant was excellent.

Tonnes per day was above 11,100 for both months and finished production for June was 37,000 ounces gold equivalent and 45,000 ounces gold equivalent in July, both real step ups from what we saw in the early part of quarter two. Secondly, the extra capital on Medialuna means that we’re largely on track with the paste plant commissioning, which is happening now, and the third and fourth ore passes at the Medialuna mine, both of which support achieving the targeted mining rates at Medialuna. And notwithstanding the challenges in the quarter, importantly for us, we finally turned the corner on free cash flow. June was our first positive month and quarter three very much tracking to be our first positive quarter. Now getting into the details here starting on Slide four, which sets out our strategic pillars, which would be familiar to everyone, they remain unchanged.

One area of the strategy that came into sharp focus here in the quarter was centered around disciplined growth and capital allocation in two ways. First, with the announced acquisitions of Reyna Silver and Prime Mining and second, we expect to further advance the work in this aspect of our strategy later this year when we announce our inaugural return of capital policy, we remain very much committed to. I want to underscore here and be clear that with the free cash flow we had anticipated out of Medialuna, we’re not thinking that M and A and capital returns are exclusive propositions. This is very much an and conversation for Torex. We intend to proceed with both.

The rest of the progress on the various aspects of the strategy will be covered off through the remainder of today’s update. Turning now to Slide five, you can see our quarterly production illustrate on the chart. I’ve already spoken to the drivers behind the weaker production and higher ASIC for the quarter. We expect quarterly results will return to normalized levels in the second half here and we think this will reinforce to our shareholders the margin and cash flow capability of Morelos. We already got a glimpse of this potential in June with gold equivalent production over 37,000 ounces and our first month of positive free cash flow since completing the Mediluna build.

Slide six shows how we’re progressing on delivering on full year guidance. With a strong second half in sight, we’re maintaining our annual production and cost guidance. Note here that we expect to be at the lower end of production guidance and the higher end of the cost range. The second point to note on this slide, as I mentioned at the outset, is non sustaining CapEx has increased to $160,000,000 to $170,000,000 for the year, largely due to costs associated with finalizing the Mediluna project. This increase comes in a couple of categories.

One, the main driver is scope transfer from 2024 to 2025 and demobilization and remobilization costs following the December fatalities. Associated with that scope transfer and the fatalities was the extension of the mining infrastructure construction period that is now drawing to a close. With the scope shift and extended project period comes additional indirects for this extra time, so you can see how it builds on itself. And over top of those things, we have a continued aggressive mine development plan at Medialuna, all to support accelerating those mining rates to 7,500 tonnes per day. Over top of that, we had no room to reallocate non sustaining CapEx from EPO to Medialuna as progress on EPO is maintaining pace.

That study in concurrent mine development will consume its 30,000,000 to $35,000,000 budgeted this year. I’d note here that there has been no change to sustaining CapEx guidance that’s very much on pace. The final point of note on this slide, when comparing our year to date performance to performance at guidance metal prices, you can see the impact that elevated gold price is having on our costs as we now report on a gold equivalent basis. It’s a good problem to have, but an important one to note in the context of where we sit today compared to where we thought we would be when we set guidance at $2,500 an ounce gold price. Andrew will take you through this in more granularity.

Got some new slides here on operational performance and the first of them is on Slide seven. You can see there on the chart on the left, setting aside the ten days of downtime at the mill in May, the processing plant is ramping up exceptionally well. Throughput in both June and July surpassed 11,100 tonnes per day well above the nameplate capacity of our upgraded mill, which is at 10,600 tonnes per day. On the recovery side at the right, you can see the metallurgical results. The plant has also been hitting its stride since the conclusion of the commissioning period late March.

Recoveries for gold, silver and copper have consistently been achieving their targeted levels. What you will notice in the chart on the top right is that copper and silver recoveries in June were significantly lower than previous months. There’s a reason for this. With the mining of our last open pit, El Limon Sur, drying to its close, we processed open pit material in the month of June, which as you know is lower in copper content. Our upgraded processing facilities were designed with the ability to batch process our ore, switching between the leaching circuit and the copper and iron sulfide flotation circuits as the metallurgy in the ore dictates.

This June was our first true test of that capability and I’m quite pleased to say it went smoothly and according to plan. Once we had processed to the available high grade open pit ore, we redirected feedback through the flotation circuits and quickly reestablished our targeted recoveries, which returned to levels more reflective of where we were in April than May on copper certainly. To my mind, this is a really good demonstration of the flexibility we’ve built for ourselves with the new processing facilities. Last note here is that remaining open pit ore has been stockpiled to be used to top up the mill if and as required until EPO EPO comes online or preferably towards the end of mine life. Moving now to mining on Slide 8, you can see both mines continue to perform very well.

Mediluna is stepping up nicely towards the targeted 7,500 tonnes per day by mid-twenty six, More on this in a moment. Over at ELG Underground, after a slower start to the year, mining rates picked up and are at or above targeted rates of 2,800 tonnes per day. Recall, we expect to be mining at these rates at ELG Underground for this year and next, supporting our need to fill the mill through the construction of EPO before returning to more typical levels of 1,500 to 2,000 tonnes per day at ELG Underground as the EPO ramps up in late twenty twenty six and starts producing in 2027. I should also note that we’re not reporting open pit mining rates on this slide as that part of our operations is now behind us. With the last blast having occurred on July 30, today at Morelos, we’re now mining 100% underground.

Turning to progress and milestones remaining on Medialuna, what’s left here? It’s set out on Slide nine. First is the delivery of PACE to be able to get backfilling and open up more stopes in the underground. Construction of the PACE plant and PACE distribution is all but complete, with wet commissioning of the PACE plant itself and the associated distribution infrastructure currently underway. I expect PACE to begin flowing in the coming weeks.

I would note, commissioning of this infrastructure is just a few weeks behind schedule. It’s a very sequential, step wise and detailed process. People tend to think here just about the PACE plant, but it’s about the plant, the Gihoe pumps, the big positive displacement pumps, the water line, the tailings line to the PACE plant that has to go seven kilometers through the tunnel, seven fifty meters vertical delta to get to the paste plant, and then the paste distribution lines on the back end. That all has to be hydrostatic tested, tested under pressure, water tested and then solids introduced. I’m pleased to say that first tailings is scheduled to be introduced August 19 and binder about a week after that.

Second important milestone here is the completion of the two remaining ore passes in the underground, one at the August and the other at the November. Once these ore passes are completed and in combination with the base backfill, we expect to open up more stopes allowing us to hit the targets we’ve set out for ourselves here, 6,000 tonnes per day by the ’3, then a step up to 6,500 by the end of the year and 7,500 tonnes a day consistently by mid-twenty twenty six. Moving on here to Slide 10 sets out the sketch of our next mine on the Morelos property, EPO. It’s advancing quite nicely. In May, we took our first development blast for the access ramp off the Wajes Tunnel.

Those of you who are on the mine tour saw this as we drove through the tunnel from the north side to the south side. We’ve now developed about two thirty meters into that tunnel, so just about halfway to the deposit. Importantly, we also submitted our permit application in May and received approval for Semranat in July for a modification to our MIA Integral for the construction of the new waste dump to support EPO construction. Additionally, the feasibility study continues to progress with a number of key items finalized during the quarter, including mine design parameters, mine sequencing, an integrated mine plan and integrated scheduling with Medialuna. Recall that EPO will utilize Medialuna’s ore handling system, so it’s important that we have these two mines working in harmony together.

We completed field tests and test work programs covering aspects of geotechnical issues, hydrogeological issues and metallurgical programs, all of which have now been built into the integrated mine design. We also assessed various trade off studies on key elements of the infrastructure design, including ore handling, ore bin or waste pass sizing, mine fleet composition and ventilation requirements. Through the back half of the year, we’ll start to place orders for long lead time items. In short, things are progressing very well at EPO and we’re on track for initial production in late twenty twenty six. With that, I’ll pass the call over to Andrew to discuss our financials.

Andrew Snowden, CFO, Torex Gold: Okay. Thank you, Jody, and good morning everyone. I’ll start my comments first looking on slide 12, which provides a summary of our Q2 financial performance. Now we were expecting our costs to peak here in Q2 which they have and that was due to the processing and sale of the initial higher cost ore coming from Media Luna. These higher costs however were further elevated in the quarter due to the lower than planned production for the reasons Jody just walked through, as well as the higher gold price quarter over quarter increasing the cost of royalties and profit sharing.

This higher all in sustaining cost resulted in tighter margins in Q2 compared to what you’ve been used to, but our margins do remain robust on a year to date basis at around 42%. With costs expected to decline through the second half of the year, we fully expect to improve these margins particularly if these gold prices continue to hold. Just looking at the lower chart on this slide now, this shows our free cash flow on a quarterly basis and you’ll note that our negative free cash flow in Q2 and this will be our last quarter of negative free cash flow. As telegraphed, we transitioned back to free cash flow in the month of June, generating $44,000,000 of free cash flow in the month and we expect to generate a quarterly positive free cash flow going forward given Media Luna Capital is closing out on our heavy tax royalty and PTU payments for this year are now behind us. Looking next on slide 13, I’ve included this slide just to highlight the impact of the gold price on our on some of our key metrics.

We did guide at $2,500 gold for the year, dollars 28 silver and $430 copper. And given the high elevated metal price environment and although positive margins, we are seeing an impact on that high gold price compared to where we expected to land at those guided ranges, particularly with respect to all in sustaining costs, which on a year to date basis are just over $100 an ounce higher than where we would have been if metal prices remained at those budgeted and guided levels. The increase is primarily driven by our royalties in Mexican mandated profit sharing payments or PTU, which account for about $50 an ounce, so about half of that increase. We’re also seeing just under $10 an ounce impact on our temporary occupation agreements and that’s due to the higher gold price as well as the expansion of our continued exploration footprint at Morelos, while $33 an ounce is due to the impact of the lower calculated gold equivalent sales. Going forward, if metal prices remain at these levels, do expect to continue to see elevated costs as every $100 an ounce increase above our guided gold price will see about a $20 to $25 impact to all in sustaining cost.

Moving on next to slide 14, you can see here that we ended the quarter with just over $100,000,000 in cash, which is maintaining our target of retaining over that threshold on the balance sheet. In the quarter, we paid our annual profit sharing or PTU payment to our employees and that was a total of $30,000,000 and that shows up within changes in working capital given it was accrued for at year end. In addition, the capital expenditures for the quarter were about $100,000,000 of which $55,000,000 relates to Media Luna and the construction of EPO. To support these demands on cash, we did draw $35,000,000 in our credit facility early in the quarter to maintain that 100,000,000 cash on the balance sheet. With a return now to positive free cash flow in the month of June and the expectation that we continue to be generated going forward, our balance sheet and liquidity position will significantly improve through the back end of the year and I expect we will start to pay down our debt this quarter.

Our debt facility and liquidity position are better illustrated here on slide 15 and you can see here our net debt position at June 30 was $226,000,000 or if you were to exclude leases about $127,000,000 As you note, during the quarter, also did amend our credit facility to increase the maturity from December 2027 to June 2029, so it’s now a four year term and we also increased the capacity from 300,000,000 to $350,000,000 Just to note, the debt facility continues to include an accordion feature, which was also increased from 150,000,000 to $200,000,000 This amended facility is all to provide financial flexibility going forward to execute on our strategic objectives while protecting our strong liquidity position. Finally, I wanted to just quickly remind everyone of our hedging position, is summarized in the table on slide 16. And just to note, there were no additional hedges put in place during the quarter. We continue to have a mixture of zero cost collars and forward contracts to protect our peso denominated operating costs. As a reminder, these provide protection for about 60% of our peso operating costs through the year.

We will look to add to this peso hedge book for 2026 as we see opportunities present themselves. With that, I’ll hand the call over to Dan.

Dan Rollins, Senior Vice President, Corporate Development and Investor Relations, Torex Gold: Thanks Andrew. Turning to Slide eighteen. We have been active on the M and A front in recent months, starting with the announced acquisition of Raina Silver in June and the announced acquisition of Prime Mining last week. The Rainer Silver and Prime acquisitions fit within our strategic objective of becoming a diversified, America’s focused precious metals producer with assets throughout all stages of the development pipeline. These transactions support asset diversification and enhance our medium and long term growth prospects beyond the potential offer up through our flagship Merrellas property.

The acquisition of Reyna Silver builds out our exploration portfolio by adding four highly prospective early stage exploration properties, two located in Nevada and two in Chihuahua, Mexico. Our exploration team is extremely eager and excited to get to work on these assets given the underlying potential of all four properties and the strong technical work completed to date by the Reyna Silver team. The acquisition of Prime Mining will give us 100% ownership in the advanced stage of Los Reyes development project in Sinaloa, Mexico. Las Reyes will become Torex next growth project outside of Marlos. And given the quality and level of work completed to date, we are looking to complete a preliminary economic assessment on the project mid next year.

The real benefit we’re capitalizing on with these acquisitions is our operating expertise, including one, exploration. We have steadily built out our exploration team over the last few years and now have the people in place to deliver on the potential we see across these five new assets leveraging our exploration framework. Number two, project development. Our project team is coming off the Media Luna build and well positioned to advance La Cerrias from PEA stage all the way through to construction and into production. And finally three, operationally.

Our team in Mexico is exceptionally well versed in handling community relations, government relations and the ins and outs of operating in Mexico including permitting and security. In our view, these attributes provide us with a strategic advantage to derisk and advance of various projects forward, especially Las Vegas. Overall, we believe we are well positioned to leverage our competitive advantage to unlock significant value across our expanded portfolio over the coming years. Finally, slide 19 illustrates how we see these five assets fitting into our exploration pipeline. A significant amount of drilling has already been conducted at Los Reyes, which is notable in where the project sits in our exploration pipeline.

Future programs will be aimed at upgrading and expanding the current resource while testing regional targets both within and outside the known trends. The RAIN assets will slot into various levels of our exploration system pipeline at the earlier levels and we’ve already drawn up plans to begin advancing programs through the remainder of 2025 and into 2026. You’ll have more color on these programs when we put out our guidance for 2026 early next year. It is important to note that these projects won’t make us take our foot off the gas when it comes to drilling at Borellos. With $45,000,000 and nearly 125,000 meters of drilling planned for this year, we continue to believe we’ve yet to unlock the full potential of Morelos, an asset we expect will be mining for decades to come.

With that, I’ll turn the call back over to the operator for any questions.

Conference Operator: The first question comes from Don DeMarco from National Bank Financial. Please go ahead.

Don DeMarco, Analyst, National Bank Financial: Thank you, operator, and good morning, Jody and team. So, yes, congratulations on the positive free cash flow inflection late in the quarter. My first question is on the Pace backfill plant. I’m reading that connection is hookup is imminent. Can you provide maybe just a little bit more color when you expect it to be operational?

And if there’s any CapEx to be incurred in Q3 on this particular item?

Jody Gisanko, President and CEO, Torex Gold: Thanks, Don. It’s Jody here. Yes, there is CapEx to be incurred in terms of the conclusion of the Pace Plant and that is built into the revised sustaining CapEx number that we provided. In terms of concluding the Pace Plant, you’ll recall, Don, you were at the site visit that we had expected to be feeding tailings by this time. We’ve had a couple of hiccups there.

One is as we were finishing the Waha’s tailings return line, that seven kilometer line, it took extra time to get the last pressure fittings and components to complete that line. And because it’s a high pressure line, you can’t substitute fittings and components. It has to be perfect. So we took an extra week there. And second, the very large GEHO pump when we were mechanical testing that blew a seal.

So that seal had to be replaced. So we’re a little bit behind schedule on that. With all of that said, with all of the components, the pump, the lines, the paste plant and then the paste distribution lines, we’re hydrostatic testing now in various stages of that at different systems. We expect to introduce tailings August 18. That is the plan.

And then a binder about a week after that. We’ve done a lot of pre work outside of the plant to make sure we have the paste recipe right, and so we expect to have a steady stream of paste here flowing by the August.

Don DeMarco, Analyst, National Bank Financial: Okay, good to hear. And so what are the implications of this on your ramp up Media Luna Underground or is there any really?

Jody Gisanko, President and CEO, Torex Gold: Yes, that’s a good question. There are implications because our stope sequencing had to be adjusted based on the timing of back filling. And so the team has had to recast the underground mining plan a couple of times now because of the sequencing of not only paced conclusion and back filling, but also the conclusion of the third and fourth ore pass. Now, the forecast we have for the balance of the year integrates the revised forecasting for paced availability and availability of RV3 and RV4. But what I will say Don, this is a testament to our strategy of keeping our foot on the gas on development.

Development at over 1,200 or 1,300 meters a month, both lateral and vertical, it’s cost us money, it’s contributed to that non sustaining CapEx overrun. But because the mine was so opened up in terms of both delineation drilling on the stopes and in mine development, we had some flexibility, we had some optionality and turns out we needed it because of the pace plant timing and RB3 and RB4 timing. And so, I’m pleased with the contingency we’ve created for ourselves. It’s a testament to our operating skills here.

Don DeMarco, Analyst, National Bank Financial: Okay. Great. That’s very helpful. And then just as a final question, just shifting over to exploration. I see that you’ve got a very upsized program this year, a lot of catalysts.

Can you just highlight maybe the top two or three catalysts and the timing of these we might expect? And in particular also when might we expect first results out of Atcala on the site tour? Saw that that would look like an interesting target.

Dan Rollins, Senior Vice President, Corporate Development and Investor Relations, Torex Gold: Yes. Thanks, Don. So we’ll we put out a press release recently and a couple other ones this quarter. The next probably set of press releases will be later in the summer and then we’ll see a more flurry of them as the programs come together towards the end of the year. Again, the key one for us is really ELG Underground and Media Luna West.

ELG Underground is key because every year we can replace reserves. That continues to push out that longer that production profile as steady state every year because we just displace low grade stockpiles. Media Luna West, you saw the result earlier this year. We’re continuing to drill there. The goal there is to get that potentially to a resource either at the end of this year or in sometime in 2026.

So those are the key targets. Drilling at Atscala, as you will have remembered, was going to be more later dated for this year, just waiting on some permits to get drilling there. But we should start to see results flowing through the pipeline to the new flow line probably in early twenty twenty six at Atscala. More importantly, I think the key ones for us are going to start to do work at the Rain and Silver assets. We’ll get our feet on the ground here at Griffin later this year, start to do some groundwork there, set it up to start to do some drill testing in 2026.

The same thing at Batapilas, which as you know is a very highly prolific silver district with a very large historical endowment. We want to get in there, start to do the groundwork again this year and set it up for drilling in 2026 as well as start to advance both Medicine Springs and Geeky. And then additionally, once we close Los Reyes, the prime transaction, we’ll get back and start drilling Los Reyes as well. So lots going on the pipeline, but the key ones at Morelos this year are ELG Underground, Media Luna West and then we should start to see more news flow towards the end of this year.

Don DeMarco, Analyst, National Bank Financial: Okay, great. That’s very helpful. Lot to look forward to and we’ll keep an eye out for that. That’s all for me, Dan. Good luck with the rest of the quarter.

Conference Operator: The next question comes from Eric Windmill from Scotiabank. Please go ahead.

Eric Windmill, Analyst, Scotiabank: Hi. Good morning, Jody and team. Thanks for taking my question. Just a quick follow-up here on the paste plant commissioning and the back up pumps. Are those still on track for installation?

I think you had said it was somewhere around October or so?

Jody Gisanko, President and CEO, Torex Gold: Yes. The short answer to that, Eric, is yes.

Eric Windmill, Analyst, Scotiabank: Okay. No, great to see. And maybe just question on exploration, the Norangeo project, I see drilling has been paused there. It sounds like there’s some construction of the drilling platforms underway. Any updates there on Norangeo and when drilling will start there again?

Dan Rollins, Senior Vice President, Corporate Development and Investor Relations, Torex Gold: Yes, no, we’re just working through that. So we’ll get back and start drilling that later this year or into early next year. We’re just sort of allocating priority. So the drilling that won’t happen there will push it to other targets on the property. But again, that’s a very early stage one, really more drill testing of a couple of targets, not a large focus for this year’s program.

Eric Windmill, Analyst, Scotiabank: Okay. I appreciate that. And just on permitting, so it was good to see that there was a permit granted, I guess, for the modification of the waste dumps. Any sort of read throughs there in terms of permitting that we should think about for prime and some of the stuff that you want to do at Los Reyes? Is that a fair statement?

Jody Gisanko, President and CEO, Torex Gold: Yeah. Eric, Torex has a long and established history, I think, of getting permits largely as we require them, both through the Medialuna build and now evidenced by EPO. That’s a testament, A, to our reputation and country B, the solid science and technical and engineering work we have associated with our permit applications, putting the environment first, which is critically important to the Scheinbaum administration. I don’t think you can reasonably read through EMEA modification for a waste dump on an established site to any sort of indication of breaking up the logjam on open pit mining permitting in country. I think that story is yet to be written there.

But I’ve said this before and I’ll say it again, we remain cautiously optimistic that under Scheinbaum’s leadership, the exceptions that she is signaling as it relates to open pit mine permitting is something that we can work with the administration as it relates to Las Rays on. We have a shot at it, we think. We were clearly prepared to place the bet.

Eric Windmill, Analyst, Scotiabank: Okay, great. That’s helpful. Really appreciate it. I’ll hop back in the queue. And yes, looking forward to the back half of the year, it looks like should be well on track, free cash flow inflection.

So looking forward to the updates. Thank you.

Jody Gisanko, President and CEO, Torex Gold: It’s going to be great.

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

Allison Carson, Analyst, Desjardins: Good morning, Jody and team and thanks for taking my questions today. Question is mostly on M and A. So you’ve obviously been busy on the M and A front and now have secured projects through much of the development pipeline. Are you still open to more M and A? And if so, what stage of projects would you be looking at now?

Is it more likely to be something closer or in production? Or could M and A still be focused on exploration and development assets?

Jody Gisanko, President and CEO, Torex Gold: That’s a great question, Alison, and we’ve gotten it a lot over the last week since we announced the prime transaction. What I will say to you is that our strategy remains unchanged. I mean, Torex was looking to get out from the single asset moniker and we were looking at assets in The Americas in three streams. One is early stage exploration plays, two is get our project team working on another project, and three is a producing asset. We’d always wanted to be doing it from a position of strength and at the right time for the organization, which explains the timing of why we did it this quarter both on Prime and Reyna.

What I will say is because we acquired four assets on the early stage exploration category, we are not out actively looking to acquire more. I think an important part of this is we’re not collecting assets for the sake of or scaling for the sake of. We want to have some time here to unlock value from the assets that we have acquired both in the context of project development and early stage exploration. That very last part of your question still is of interest for us, notwithstanding the fact that we’re not a single asset anymore, we’re still a single producer. We have a couple of mines, but we still have a single process plant.

And so we remain open to M and A as it relates to potentially acquiring a producing asset, But again, it will be at the right time, at the right price, in a way that complements the portfolio. No need to overpay. Medi Aluna is ramping up beautifully. We’ve got free cash flow coming to us from Morelos in a way that we’re quite pleased about. So, still very much the right deal at the right time.

I think we’re pretty much done on exploration for a while. We’ve got another project now ahead of us in addition to the Morelos projects with EPO and then Medioleuna West and Medioleuna East behind it, but remain open to a producing asset as appropriate.

Allison Carson, Analyst, Desjardins: Well, thanks. Yes, that makes a lot of sense. And then just looking at Los Reyes, Prime had not been drilling the project since January, but security conditions seemed like they were improving. Are you expecting to be able to drill the property once the acquisition closes in H2? And then how important is being able to drill the project for you in terms of achieving the timeline that you’ve set out?

Jody Gisanko, President and CEO, Torex Gold: Yes. When you’re talking about achieving the timeline that we’ve set out, what we did say when we acquired Prime was that we would put a PEA out mid-twenty twenty six. Scott Hicks and his team have done a brilliant job of drilling off that asset. They’ve drilled more than 220,000 meters. And so while you could always have more drilling to inform a PEA, we think there is enough drilling there to responsibly put out a credible PEA by mid-twenty twenty six.

So that doesn’t impact the timeline. In terms of your first question around the security circumstances in Khozalah, what I would emphasize is that Scott’s assessment and our assessment of the security issues were not centered around any anti mining sentiment, they were not centered around any anti prime or anti drilling sentiment. What they really were was cartel issues where Scott and his assessment found that it was not appropriate to have his team traveling the road to site. What we will do very early days here in concert and in discussion with Scott and his team, even pre closing, is get our team on the ground, start to put resources in place to gain information, real time information about the security situation, and we hope to be. I can’t say we expect to be because this is in part out of our hands.

We hope to be drilling again this year as that settles down. We believe the security issue is very much a point in time issue. Sinaloa is widely known for being a fairly stable region from a security perspective historically.

Allison Carson, Analyst, Desjardins: Well, great. That’s it for me. So thank you so much for taking my questions this morning.

Conference Operator: Thank you. The next question comes from Jeremy Hoy from Canaccord Genuity. Please go ahead.

Jeremy Hoy, Analyst, Canaccord Genuity: Morning, Jody and team. Thanks for taking my question. Just one for me. You’ve talked about recasting the mine plan for this year to accommodate the slight delay in the PACE plants and also to achieve the guidance range, which you’ve set out. Is there any anticipated impact on production or costs in the following years?

Or has the development that you guys have done provided sufficient space to breathe on that front to be able to maintain your longer term outlook?

Jody Gisanko, President and CEO, Torex Gold: That’s a really good question, Jeremy, sometimes some companies do mine planning as though the year ends and then there is not a discussion about what happens in the following year. We’ve been very thorough in recasting the mine plan six months, twelve months, eighteen months and 24 ahead of ourselves here, getting less and less specific as time goes out, as you would imagine. We’ve got very good short term mine planning processes in place. And so, the short answer to your question is that we are exceedingly optimistic about the mine plan heading into 2026. It is less risky.

It will be less changed throughout the course of the year. And when you’re not changing things as a result of construction activities, a planned mine is more likely to deliver better safety, better production and better costs. And so we look forward to getting back to the usual state here with Torix where we plan, schedule and execute with discipline as opposed to moving through a number of different plans given the variabilities of construction in the active mine this year.

Jeremy Hoy, Analyst, Canaccord Genuity: Okay, great. Thanks, Jody. Looking forward to the back half of this year.

Jody Gisanko, President and CEO, Torex Gold: So are we. Thank you, Jeremy.

Conference Operator: As there appears to be no more questions, this concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

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