Santacruz Silver (TSXV:SCZ) - Strengthened Financial Position, Deleveraged and Developing

Interview with Arturo Préstamo Elizondo, Executive Chairman & CEO of Santacruz Silver Mining Ltd.

Our previous interview: https://www.cruxinvestor.com/posts/santacruz-silver-mining-tsxvscz-stabilising-silver-production-to-bolster-balance-sheet-3925

Recording date: 27th November 2024

Santacruz Silver Mining (TSXV:SCZ) is hitting its stride after a transformational year that has significantly bolstered the company's financial position and growth prospects. The Bolivia and Mexico-focused silver producer delivered strong Q3 2024 results with $78M in revenue and $16M in EBITDA. More importantly, Santacruz has emerge from a multi-year restructuring effort with a much cleaner balance sheet and ample liquidity to fund organic growth.

The key development was a successful renegotiation of Santacruz's agreement with senior partner Glencore. By amending the terms, Santacruz eliminated $8M in annual royalty payments and pushed out the maturity on $40M of debt to late 2025. This, combined with improved operations, has enabled Santacruz to generate meaningful free cash flow, with $20M in cash as of Q3.

Management is taking a two-pronged approach to driving shareholder returns: reducing costs at existing mines while advancing low-capex, high-impact growth projects. A focus on optimizing ore blending, modernizing equipment and leveraging synergies between mines is starting to bear fruit, with all-in sustaining costs trending lower. CEO Arturo Préstamo Elizondo sees further opportunities to boost efficiency, stating "We're doing works and having initiatives across all our mines to achieve better production and lower costs."

On the growth front, the flagship organic project is restarting the past-producing Soracaya mine in Bolivia. Originally built to produce 4Moz silver annually, Soracaya is essentially turnkey and can be brought online within a year for minimal capital. Santacruz is also building a new mill at San Lucas to double output to 4Moz silver equivalent by bringing processing in-house. Together these two projects provide a clear path to 25%+ production growth over the next 2-3 years.

Underpinning the Santacruz investment case is a bullish outlook for silver prices. While up substantially since 2020, Prestamo sees $20/oz as "a solid floor" based on strong industrial demand growth. "More and more uses are coming for silver, not only solar panels but for environmental and pharmaceutical use. Unlike gold, silver is used up, so you always need new ounces," he explained. Higher silver prices would amplify the impact of Santacruz's operational improvements and growth initiatives.

In summary, Santacruz offers investors a compelling turnaround story with multiple ways to win. With its balance sheet derisked, costs falling and production poised to climb, the company is well positioned to deliver outsized returns going forward. If management and the entire operations can execute, Santacruz has the potential to be a standout performer in a rising silver price environment.

View Santacruz Mining's company profile: https://www.cruxinvestor.com/companies/santacruz-silver-mining

Sign up for Crux Investor: https://cruxinvestor.com