Santacruz Silver (TSXV:SCZ) - Strong Cash Generation Funds Debt-Free Growth

Sep 12, 2025

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

Our previous interview: https://www.cruxinvestor.com/posts/santacruz-silver-tsxvscz-q1-revenue-hits-70m-as-turnaround-plan-delivers-results-7297

Recording date: 11th September 2025

Santacruz Silver Mining represents a compelling investment opportunity for investors seeking exposure to a financially disciplined silver producer with strong fundamentals and clear growth catalysts. The company has successfully completed a strategic financial restructuring that positions it as one of the cleanest balance sheet stories in the precious metals sector.

The company's financial transformation is remarkable. Santacruz has completely eliminated its acquisition-related debt obligations, paying off the final $15 million of its Glencore asset acquisition ahead of schedule while securing an additional $40 million in savings through an acceleration clause execution. This achievement has resulted in a pristine balance sheet with no streaming agreements, no royalties, and minimal debt beyond a strategically structured $20 million promissory note in Bolivia that carries a negative implied interest rate.

Operationally, Santacruz demonstrates impressive resilience and diversification through its portfolio of four producing mines and one ore sourcing company spanning Mexico and Bolivia. The company generates over 7 million ounces of pure silver annually alongside significant zinc credits, with management projecting $90-120 million in annual free cash flow. This operational strength was evidenced when recent flooding at two Bolivian veins was immediately offset by San Lucas trading operations, which sourced replacement ore from third-party miners to maintain full mill capacity utilization.

The investment thesis is strengthened by favorable currency dynamics in Bolivia, where 80-85% of operational costs are denominated in Bolivianos. The recent devaluation of the Boliviano creates ongoing cost advantages that directly improve all-in sustained cash costs and enhance profit margins, particularly beneficial in the current rising silver price environment.

Santacruz's primary growth catalyst centers on the advanced Soracaya brownfield project, which management characterizes as "advanced organic growth." This asset features existing 43-101 resource reporting and previous development work by Glencore, with full permitting expected within 7-10 months. Once operational, Soracaya will contribute an additional 4 million ounces of annual silver production - representing approximately a 60% increase in output - funded entirely through internal cash generation without equity dilution.

The company's resource base offers exceptional longevity and expansion potential. Current reserves and resources provide approximately 12 years of mine life in Bolivia alone, supported by vein systems that allow for both deeper development and strike length extension. Notably, the Porco mine represents the longest continuously producing mine in the Americas with 500 years of non-stop operation, while other assets have maintained production for over 200 years, demonstrating the sustainability of these geological systems.

From a valuation perspective, Santacruz appears attractively positioned with an enterprise value approximately six to seven times projected EBITDA of $110-120 million, trading at a discount to many precious metals peers. This valuation gap, combined with the company's strong cash generation capabilities and strategic flexibility for acquisitive growth, presents multiple pathways for value creation.

The macro environment further supports the investment case, as silver benefits from dual demand drivers spanning both industrial applications and monetary hedge demand. Industrial consumption continues expanding through renewable energy infrastructure and electronics manufacturing, while supply constraints from primary silver operations create additional price support.

For investors seeking exposure to a well-managed silver producer with proven operational capabilities, clean financials, and clear growth visibility, Santacruz Silver offers a compelling risk-adjusted opportunity in the current precious metals landscape.

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