IMPACT Silver Corp. (IPT) Earnings Call Transcript

Good day, ladies and gentlemen. Welcome to IMPACT Silver's Q3 2025 call period ending September 30 financial and production results conference call. Before we begin, we would like to go over our disclosure policy, followed by Mr. Fred Davidson's comments about the quarter's results and the Q&A period. Certain statements in the following conference call regarding IMPACT Silver's business operations may constitute forward-looking statements. Such statements are not historical facts, but are predictions about the future, which inherently involves risks, uncertainties and could cause actual results to differ materially from those contained in the forward-looking statements. I would like to now turn over to President and CEO of IMPACT Silver, Mr. Fred Davidson.

Thanks, Jerry. The third quarter was quite an interesting one for the company for a variety of reasons, both operationally and financially. The results for the quarter in terms of revenue was up to $10.7 million compared to $8.6 million for the comparable quarter in 2024. That improvement in revenue has obviously resulted from higher silver prices during the period. And then on the other side, the bottom line improved as well fairly substantially. We had a loss in 2024 for the quarter of $3.1 million and the net loss in 2025 for the quarter was $0.6 million, mostly as a result of a very aggressive exploration program that we were working on during the third quarter. Highlight of the period was Zacualpan, and that's our silver lead zinc mine. It's been -- its revenue was $8.7 million, and that's up from $6.1 million from the prior -- the comparative period. That's an 8% increase. And that was, quite frankly, with not much of an increase in ounces. It responded in many ways to the rising price of silver. And as everybody knows, we're one of the sort of most highly leveraged companies to silver. Plomosas on the other hand, was up to $7.9 million for the year-to-date, but it was down in the quarter. And it was just a series of those whack-a-mole things that happened in mining that made it tough for us for that quarter. One included a flood in one of the areas of the mine that disrupted operations. And the other was some bad ground conditions that caused us for the quarter literally to move around an area that was not safe. And it meant that we couldn't access our higher-grade ore for a good portion of the quarter. And that meant that we saw lower tonnes coming through and at the same time, lower grades coming through. We're now past that, and the fourth quarter is looking more substantial in terms of throughput. For Zacualpan, it still grinds away to us and develops good tonnages and good grades. The exploration is continuing on the Kena, which is probably the real star for the moment. It's high grade. It's substantial in size and continually gives us positive responses and recoveries. The downside for the quarter was only on the production side. We could have actually increased more throughput. But for 84 days, 1 of our 3 ball mills was down for major repairs, and that really disrupted our design for production for the quarter. It's now back, it's fixed. And going forward, we expect to see more tonnage going through. So at the end of the fourth quarter, we should see more tonnage. There's always issues with the Christmas period and what have you, but it should be a good strong quarter for Plomosas or rather for Zacualpan. And Plomosas, I think we're finally past that area of low grades, and we're getting into some better grades as we go towards the end of the quarter. The team on exploration, meanwhile, has been focused on 2 areas. In Plomosas, we've been working on the current deposits that we're mining. That's the -- let's call it the Plomosas mine, but it's also called Tres Amigos. But we've been focusing on Mina Juarez, which was never in the JORC that we acquired from the Australians. Secondly, we're starting to drill into another one called Santo Domingo. Grades are good and solid. Widths are variable. And because of the very nature of the deposit, it's a little difficult to really put a hard number on it, but we're going forward. On the other hand, Zacualpan, we're into the brand-new [indiscernible] Noche Buena, Carlos Pacheco area. And Carlos Pacheco, Noche Buena was originally identified almost about 9 years ago. And because of pricing and everything else, it really wasn't very attractive. It is now with the current price. We're in there. It's got gold and silver, and we expect to see that rise as we go forward for the quarter and for the next probably 6 to 9 months minimum. So overall, the program for exploration is going forward fairly aggressively. At the same time, we're going to see an uptick in production coming through for the fourth quarter and certainly into the first quarter of 2026. The team is well organized. We're well funded. We're currently looking at a number of other private opportunities -- privately held opportunities, which don't normally cross the path of Canadian companies running through Mexico. These are privately held and because of our Mexican exposure, we have the opportunity to go identify them, and we will be over the next while. Last but not least, we obviously raised some money. The question is, why did you raise money? There's 2 reasons for that. One, it was in this business, when it's available, you tend to take it. We did do it under a life, which was probably a little tough on the marketplace because people turned around and sold it because there was an immediate gain for them. But we are also phasing 9 million warrants that were coming due at the end of the month. So we knew we were going to be under pressure anyhow for at least a quarter. And I think once we flush through those, the fact that we are sitting on over $25 million in cash, no debt, strong working capital, growth in both mines and quite frankly, on the path to looking for another acquisition or 2 that we've seen that are very attractive, it's just a matter of putting it together for those things. And at the same time, rationalizing some of our other activities to improve our operating costs at both mines. Jerry, over to you.

Great. Excellent summary, Fred. Here are some of the questions that have come from investors this quarter. Again, for future inquiries, please send questions to inquiries@impactsilver.com, or call us direct at (778) 867-7909. Question 1, great quarter, Fred, good mine operating income and turnaround. Still on a net loss, but after EBITDA, it was looking like $100,000-plus positive. Is this now the expected run rate at $40 to $50-plus an ounce silver? And can investors expect better for Q4?

Well, Q4 is always an adjustment period anyhow. So I have no idea we run into the adjustment for depletion and accounting issues. But I would say in terms of the top line, yes, we can. And I think on that sort of operating cost issues, yes, we can. When we get down to the administrative and all those issues that the auditors come up with in terms of how we're going to deplete certain assets, et cetera, that's outstanding. But yes, things are looking positive and especially positive for the first quarter, we'll be clear of all of that and have a good run rate ahead of us as both mines should be operating pretty well where we want them to be operating. Plomosas a little lower tonnes than we'd like only because of the development time, et cetera, on some of the projects there. For Zacualpan, I think it's going to be running at probably at least 10% to 20%, let's say, 10% to be conservative above our current throughput.

Okay. Excellent. Question 2, again, more on the accounting adjustment side, but depreciation and amortization seems to be running lower on both Guadalupe and Plomosas so far this year, $2 million versus $2.5 million last 9 months, 2025 versus 2024. Is this expected to be the new normal run rate?

Well, that's primarily -- first, I should probably -- for the most part of the depreciation and amortization relates to the capitalization that we've done. And each mine that we operate from has a different capital cost or CapEx that you have to amortize over the tonnes that come out of there. And what's happening is depending on where we're mining at a given point in time, you're amortizing a larger lump or a smaller lump. And I think what we're seeing, and I can't recall the exact numbers, but I can tell you what it is, is it's going to be at Zacualpan because as we pull from one mine maybe an extra 10%, it means another mine, we're not pulling from. And that means we're not amortizing that mine as much -- that other mine as much. And on the one we are mining, of course, we're amortizing more. So it does vary and it's going to continue to vary just the very nature of that. For Plomosas, it's not the same. We're mining basically from one mine. And the end result is we have a number, and we're amortizing that tonnes taken out of that based on that number. So you'll probably see that Plomosas hasn't changed very much where Zacualpan does.

Got it. Okay. And question 3, there's a nice bump of 8% on operations at Guadalupe. I think you alluded to that earlier, Fred, that we're expecting the tonnage throughput to increase a bit. Is that the most we can expect at $50 silver? Or can we expect IMPACT to get to 1 million ounce a year once again via organic growth or expansion? And then secondary on that, what's the equivalent of the silver ounces now for both mines, Plomosas and Guadalupe?

That's a tough one. The first one is we're probably going to see -- well, we are going to see an increase in throughput. I don't think next year, we're going to get to 1 million ounces only because as the prices go up, your definition of ore goes down. And the mine is the same grade but we'll be getting -- generating more revenue because we're aiming for -- when we go into an area, our cutoff might be, let's say, 120 grams. And with the higher price, we might drop it to 110. So we'll be actually mining more tonnage. Maybe -- well, we'll be mining more silver, but because the prices are so much higher, you're going to have a bit of a pushback, but only because it means more dollars on the bottom line. As for Plomosas and Guadalupe, it's really hard to take a mine that's doing zinc, lead and silver and converting it to an effective silver. These people that use equivalents drive me nuts because, of course, silver is highly volatile and some of these other metals aren't. And to put them in the same pot is probably a little suspect. But in any event, I think the easiest way to do it is probably compare the 2 revenues for the quarter, if I can't do it because I'm not supposed to do it, but you can take the 2 revenues for the quarter, take the Zacualpan revenue, divide it by the number of ounces and you're going to end up with a factor. And that factor you then divide into the Plomosas revenue, and that will give you what the equivalent silver production would have generated. And that's what's generated as opposed to these so-called equivalents, which are in situ and don't account for the fact that you get a heavier discount on other things other than silver. So yes, I'd suggest you do that. That will give you a ballpark.

Yes. No, that's kind of the -- what we suggest. But obviously, if investors reach out to us, there are some analysts and third-party analysts and vendors and media types that's been putting into equivalency basis on base metal projects, zinc and lead ore, which as Fred and our QP alluded to, we're not supposed to because they're technically not precious metals, but there are a lot of companies in our industry without name names that do provide silver equivalent just on a revenue basis is how they're doing it. So we're happy to provide that on a personal basis, but we can't put that on a press release. It's what Fred is trying to say. Question 4, almost 14,000 meters drilled at Guadalupe and Plomosas IMPACT team. Why is it that IMPACT doesn't report a lot of these from the Zacualpan side and mostly on the Plomosas side?

Well, on the Plomosas side, in Q1, we had a report. Q3, we had 2 news releases. In Q4, we've just done a news release. As for Zacualpan, we only did 2 releases, and that was on Kena, Q1 and Q2. The problem being is, yes, we do a lot of drilling, but many of the assays are conducted in our lab. And because it's not a certified independent lab, we can't report them. But they are done for industrial purposes as we go forward doing our own mine designs and planning. And we believe we'll probably even do more meters drilled in next year.

Okay. Got it. Question 5 relates to the last point you covered, Fred. Will there be more financing? The $16 million deal was great for it on balance sheet, but really killed the momentum of the stock in September. With Plomosas seemingly running fine now, should there be any more need for cash?

No. No. In fact, that's probably why we did it when we did it. Can you stop the thing for a minute?

Yes.