IMPACT Silver Releases Management’s Discussion and Analysis for Q1 2024
IMPACT Silver has published its Management's Discussion and Analysis (MD&A) for the three months ended March 31, 2024. This document, prepared as of May 27, 2024, should be read alongside the company's annual audited consolidated financial statements for the year ended December 31, 2023, and the related notes. All figures are in Canadian dollars unless specified otherwise.
IMPACT Silver is recognized as an intermediate miner with strengths in production, growth, and exploration. The company holds an extensive land position in Mexico, with significant exploration potential at its legacy Royal Mines of Zacualpan assets and the high-grade Plomosas zinc-lead-silver property. IMPACT operates aggressive exploration programs using its own diamond drills to expand operations and provide shareholders with resource upside potential.
The company controls three extensive mineral districts in Mexico. The Royal Mines of Zacualpan Silver-Gold District, in central Mexico, has been producing for 18 years. Adjacent to this is the Capire Mineral District, covering a total of 211 km². In Q2 2023, IMPACT added a third mining district, Plomosas, located in northern Mexico, which is a high-grade zinc-lead-silver mine. Significant upgrades to the Plomosas mill and infrastructure began in April 2023, with limited production restarting later in the year. The initial phase 1 drill program at Plomosas has been expanded with a second drill rig, testing additional targets on the property.
IMPACT has been primarily a silver producer, highly leveraged to silver prices, with gold production becoming more significant. With the Plomosas mine expected to return to normal production in late 2024, the company's production profile will include substantial levels of zinc. Since 2006, IMPACT's exploration programs have led to the development of ten sites, producing over 12.7 million ounces of silver, generating over $265 million in revenues, and funding more than $84 million in capital expenditures and exploration.
To combat industry-wide cost pressures from inflation and a strong Mexican Peso, IMPACT maintains aggressive cost controls and production efficiencies. Management is assessing potential changes in mining processes and new technologies to improve margins and offset higher supplier and labor costs. Several non-critical projects have been deferred to offset higher costs.
Plomosas Acquisition
On April 3, 2023, IMPACT closed a Share Purchase and Sale Agreement with Yari Minerals Ltd., previously Consolidated Zinc Limited, to purchase all outstanding shares of their Mexican subsidiary, Minera Latin American Zinc S.A.P.I. de C.V., which holds a 100% interest in the Plomosas zinc-lead-silver mine. The total purchase price was US$6.0 million, consisting of US$3.0 million in cash with the balance in IMPACT shares, plus a 12% net profit interest royalty payable to Yari. Certain adjustments in the acquisition price are currently under negotiation.
The acquisition expands IMPACT's production profile and adds significant metal diversification through high-grade zinc-lead-silver deposits. The company's multi-decade experience in Mexico, combined with a strong balance sheet, positions IMPACT to capture significant upside from this acquisition and become a leading high-grade zinc producer in northern Mexico.
Q1 2024 Achievements
Key achievements in Q1 2024 include contracting Bell Internacional to provide a Tesla battery energy system with solar at the Plomosas mine, expected to reduce annual energy costs by 30-45% and decrease carbon emissions by 90%. The company also announced encouraging drill results at Plomosas and ongoing rehabilitation of the mine following the start-up of restricted mining operations in late 2023. Additionally, substantial drilling activities at Zacualpan and Plomosas aim to add feed for mining and processing.
Subsequent to quarter-end, IMPACT announced an $8.2 million non-brokered private placement financing. The first tranche closed on May 21, 2024, raising $7.1 million.
Q1 2024 Financial Highlights
Revenue for Q1 2024 was $5.3 million, with $1.0 million from Plomosas. After investing $1.9 million in exploration expenditures and mining assets, the cash position was $3.6 million with working capital of $2.7 million. The net loss for Q1 2024 was $3.1 million, including $1.9 million incurred by MLAZ, compared to $0.3 million in Q1 2023. The company has no long-term debt.
Q1 2024 Review
During the quarter, IMPACT milled 31,735 tonnes of feed at the Guadalupe complex, down from 38,688 tonnes in Q1 2023. Maintenance efforts led to lower silver production, with 137,291 oz produced compared to 167,050 oz in Q1 2023. The company recommenced limited production operations at Plomosas in October 2023, with substantial rehabilitation efforts ongoing.
Governmental Factors
In April 2023, the Mexican government announced new mining legislation. IMPACT expects its operations to be mostly unaffected and continues to operate profitably while maintaining leading ESG programs and standards. Management is exploring carbon-reducing infrastructure initiatives to improve ESG and operational cost profiles.
