Sunshine Silver Mining & Refining Company (SSMR) Earnings Call Transcript

Good morning, everyone, and welcome to the Sunshine Second Quarter Earnings Webcast and Conference Call. [Operator Instructions] Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Andre van Niekerk, Chief Financial Officer. Please go ahead.

Good morning, everyone, and thank you for joining the call of Sunshine Silver Mining & Refining. Joining me on the call today are Heather White, our Chief Executive Officer; and Dr. Thomas Kaplan, Chairman of the Board. Before we begin, I would like to remind everyone that today's discussion may contain forward-looking statements regarding the company's plans, expectations and future performance. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Please refer to the cautionary statements included in today's presentation and yesterday's press release as well as the risk factors described in our filings with the SEC. We issued our second quarter 2026 financial and reporting results yesterday after market closed. The earnings release and our quarterly report on Form 10-Q are available on our website and through the SEC's EDGAR database. With that, I'll turn the call over to Heather.

Thank you, Andre, and welcome, everyone, to our first quarterly earnings conference call as publicly listed Sunshine Silver Mining & Refining. Beginning on Slide 4, I'm excited to share the progress we are making at the Shine and the opportunity we see both within the existing Sunshine footprint and across our broader land position. As this is our first quarterly call, I'd like to begin by putting the progress we've made into context and address what differentiates Sunshine, why we believe this asset is so well positioned and how the work underway today supports our path forward. That story begins with location. Turning to Slide 5, Sunshine is located in Idaho's Silver Valley, the most prolific silver district in U.S. history and a top 10 mining jurisdiction globally. The region offers established infrastructure, access to skilled labor, and we have some of the best hands in the business and strong community and government support for mining. Second, when it comes to asset quality, grade is king. And as you can see on Slide 6, Sunshine sits well above the rest. The Sunshine Mine hosts North America's highest-grade primary silver resource. It is home to 103.9 million ounces of indicated silver resources at 1,022 grams per ton and 159.8 million ounces of inferred silver resources at 776 grams per ton. That's 3x the average of other high-grade silver assets globally and 2x higher than our Silver Valley neighbors. As seen on Slide 7, our total resource currently supports what's envisioned to be a generational 24-year mine life. And we're just getting started. Stellar drill results to date from our ongoing 50,000-meter drill program are expected to increase our confidence in those resources and have uncovered significant near-mine potential. That all said, our current base case, which assumes approximately 1,000 tons per day throughput, delivers 6.7 million ounces of payable silver annually in the first 5 years and 5.8 million ounces annually over the life of mine. This translates to the Shine being the second-largest primary silver producer in the United States when it comes online. Turning to Slide 8. Sunshine offers investors a compelling pure-play silver opportunity with leverage to the silver price. At today's silver price of approximately $60 per ounce, Sunshine has a net present value of $2.2 billion. This increases to $3.2 billion at $80 per ounce. This value doesn't include the benefit of byproduct credits nor the refining of critical minerals, of which there's plenty of potential value add. As I said, grade is king. And as the highest grade pure-play silver resource in North America, it's easy to drive significant leverage to silver price. As you can see on Slide 9, Sunshine also benefits from existing infrastructure that has been maintained and modernized with over $200 million of investment since 2010. In today's dollars, we estimate replacement cost of this infrastructure to be approximately $600 million. In addition to existing infrastructure, we have the major permits already in hand that are required to restart mining, milling and refining operations at the Sunshine Complex. Together, these advantages provide a derisked path toward our planned return to production in late 2028. That all said, the opportunity at Sunshine extends beyond the current mine. As shown on Slide 10, our 50,000-meter infill drill program is currently underway. As we work on infill in support of the feasibility study, we're seeing near-mine exploration potential as well. Our program has delivered remarkable results to date, especially in the Upper Country. In complement to other near-mine areas, these results are reinforcing our conviction in potentially doubling mill throughput to 2,000 tons per day, and I'll share more about these results later in the presentation. Moving now to Slide 11. The map here shows our 9,561 hectare mineral rights position, where we see untapped district-scale exploration potential. We are the largest mineral rights landholder in the Silver Valley, and we intend to explore it. This is exploration opportunity that is unseen in the 140-year history of Sunshine. Our land position creates the potential to expand our mineral resource base and over time, develop additional mines across this district. As stated on Slide 12, when we say the next Sunshine is at Sunshine, we mean it. And the completion of our IPO provides the financial foundation to begin translating that opportunity into execution. Turning to Slide 13. Our successful IPO this quarter was a transformational event for the Shine, American silver production and our shareholders. We successfully raised approximately $310 million through the offering and bolstered our shareholder register with top-tier institutional holders. We now have the cash on hand to fully fund our key work streams over the next 12 months without requiring additional capital. And importantly, we introduced Sunshine to the public markets with the capital and visibility to now advance the highest grade undeveloped silver asset in North America. I say it was transformational for American silver because when Sunshine comes online, it will be the second largest primary silver producer in the United States. Silver's addition to the U.S. list of critical minerals formally recognized its importance to the American economy and national security as well as the risks associated with potential supply chain disruption. Silver is essential across energy infrastructure, electronics, advanced technologies, aerospace and defense, and yet the United States currently accounts for only approximately 4% of global mined silver production. Bringing Sunshine online would, therefore, do more than create value for our shareholders. It would introduce a new large-scale domestic source of a critical mineral at a time when the United States is prioritizing secure and resilient supply chains. That said, we're building more than just a silver mine. As shown on Slide 14, we see the potential to build a vertically integrated U.S.-based mine-to-refinery platform that can help support domestic critical mineral supply chains. The first component is our existing permitted Silver-Copper Refinery, which has the nameplate capacity to produce 10 million ounces of silver annually. Restarting this refinery could allow us to produce COMEX-deliverable silver on site, creating a direct connection from silver mined at Sunshine to finished silver bars produced in the United States. The second component is the permitted Sunshine Antimony Plant. A new facility has the potential to produce up to 34.5 million pounds of finished antimony annually, which, if achieved, could supply up to approximately 60%, excuse me, of U.S. annual demand. We are also evaluating the opportunity to toll process antimony-bearing concentrates from third parties, creating yet another potential source of feedstock and revenue. These opportunities are grounded in the storied, proven history and existing capabilities of the Sunshine Complex. Separate feasibility studies evaluating the restart of the Silver-Copper Refinery and development of the Antimony Plant are underway. We have also engaged a top-tier management consulting firm to conduct a strategic assessment of both of these opportunities, and their findings will inform their respective feasibility studies. Together, these assets give Sunshine the potential to become one of the few integrated silver and critical minerals platforms in the United States, creating value for what we mine and can process and refine on site. Turning to Slide 15. We believe Sunshine is the right asset at the right time for American silver. We have a high-grade, long-life resource in a premier U.S. jurisdiction, existing infrastructure and major permits already in hand, untapped near-mine and district-scale growth potential and the opportunity to build an integrated U.S. silver and critical minerals platform. Those attributes define the opportunity. With the completion of our IPO, we now have the financial foundation to advance our current work programs with a clear focus on execution. Andre will now review our second quarter financial results and liquidity. Following his remarks, I'll return to discuss the operating progress we made during the quarter and the milestones ahead as we advance toward a final investment decision for the Sunshine Mine and our planned return to production in late 2028. Andre, over to you.

Thank you, Heather. Turning to our operating performance on Slide 16. Sunshine reported a net loss of $16.7 million or $0.13 per share for the second quarter of 2026 compared to a net loss of $7 million or $0.08 per share for Q2 2025. The net loss increased by $9.7 million for the -- from the comparable period, primarily due to planned acceleration of our development activities and the costs associated with preparing for and operating as a publicly listed company. Predevelopment expense increased by $7 million from Q2 2025. This increase was primarily related to the advancement of our 3 feasibility studies, including the ongoing infill drilling program and associated technical work. G&A expenses increased by $4.7 million in Q2 2026 from the prior year period, primarily due to increased personnel costs as we build out our workforce, stock-based compensation and the expanded scope of legal and accounting services as we prepared for and completed our public listing. Other income expense saw a $2.1 million improvement from Q2 2025, primarily due to lower interest expense and interest earned on the proceeds from our IPO. Overall, the year-over-year increase in our net loss reflects the higher level of activity related to the ongoing advancement of the Sunshine Mine feasibility studies and our costs related to the preparation for and operating as a public company. Turning to cash flows on Slide 17. Cash used in operating activities was $22.8 million during the first 6 months of 2026 compared with $7.2 million in the prior year period. The increase primarily reflects the higher activity level mentioned earlier, infill drilling and G&A expenses. Cash used in investing activities was $9.5 million, an increase of $5.2 million over the first 6 months of 2025, reflecting increased investment in mining equipment and infrastructure. Our treasury at the end of the second quarter sits at a very robust $288.7 million. This compares with $31 million at December 31, 2025. The increase primarily reflects the net proceeds received from our initial public offering. Note that prior to the IPO, the company did not have any long-term debt, and this continues to be the case at June 30, 2026. The net proceeds from our IPO provides the capital required to fully fund our near-term activities. And as we advance toward production and continue to evaluate our vertically integrated mine-to-mill-to-refinery platform, we expect to require additional capital over time. Our financing strategy is focused on prioritizing debt financing and nondilutive sources of capital. We will evaluate the timing and structure of those sources as we -- our feasibility work advances and our capital requirements become clearly defined. In the meantime, we are focused on managing our liquidity and deploying capital in a disciplined manner against the milestones required to advance toward production. I will now turn the presentation over to Heather to discuss the progress made in the second quarter.

Thank you, Andre. Turning now to Slide 18 and our second quarter operating highlights. We continue to advance the work required to return the Sunshine Mine to production. The Sunshine Mine Feasibility Study remains the cornerstone of our development plan and is expected to be completed in the second quarter of 2027. The study will bring together the technical, economic and risk analyses required to support a financial investment decision. Subject to that decision, we are planning to begin construction and continue on with mine development and infrastructure upgrades in 2027, with first production targeted for late 2028. At the mine, we continued underground development and the modernization of certain existing infrastructure. In the first 6 months of the year, we completed approximately 1,200 meters of underground development. And during the quarter, we also commissioned a replacement operating hoist for the Jewell Shaft and advanced the planned decommissioning of the existing mill facilities to prepare the site for construction of a new mill. As part of the feasibility study, we are advancing plans for a new mill designed to process up to 2,000 tons per day. While our current base case assumes approximately 1,000 tons per day, designing for greater capacity provides built-in flexibility to increase throughput as our resource base and operating plan evolves. Turning to Slide 19, drilling is another central component of our feasibility study and our longer-term growth strategy. As of July, our 50,000-meter [ infill drilling program was approximately ] 60% complete, with 3 active drill rigs underground. The program [Technical Difficulty] in the upcoming feasibility study. Drilling to date has focused in part on the Upper Country, which you'll see in the image on this slide. The Upper Country is a historically under-mined and under-explored area extending from near surface to approximately 1,900 feet below ground. Results across multiple vein systems, including the newly identified 10 Vein, continue to demonstrate the potential of this area. And in complement to other near-mine zones will help inform our evaluation of a potential increase in processing capacity from 1,000 to 2,000 ton a day. The program has now transitioned downshaft to 3 new drill stations accessed via the Jewell Shaft, where the next phase will also focus on infill drilling. Looking ahead on Slide 20, our development plan is organized around 3 strategic priorities: restarting the Sunshine Mine, unlocking near-mine and district-scale exploration potential, and evaluating the development of the Sunshine Antimony Plant and restart of the existing Silver-Copper Refinery. For the remainder of 2026, our focus will be on execution. We expect to complete our 50,000-meter infill drill program in support of the Sunshine Mine Feasibility Study. And concurrently, we're targeting an additional 1,300 meters of underground development to establish additional drill stations, improve access to priority mining areas and support the feasibility-level mine planning. Decommissioning of the mill is going well. We expect to complete this project by year-end and advance site readiness for new mill construction. We also expect to begin the Silver Summit Project, which is a multiphase shaft upgrade designed to ensure we have a reliable secondary egress from underground workings. Through the balance of this year, we plan to advance a hoist room upgrade and complete a hoist redrive with broader upgrades planned through next year. And as for 2027, we expect it to be a key decision-making and execution year for Sunshine. Our planned milestones include completing the Sunshine Mine Feasibility Study, making a final investment decision. And subject to that decision, commencing mill construction and additional infrastructure upgrades. We also expect to complete the separate feasibility studies for the Antimony Plant and Silver-Copper Refinery in early 2027 and evaluate final investment decisions for those opportunities. From there, our plan targets first silver production from the Sunshine Mine in late 2028, followed by the ramp-up to commercial production in 2029. At the same time, we intend to continue exploring near-mine targets that could support resource growth and future expansion. Beyond 2030, our objective is to continue evaluating mineralized zones across our consolidated, district-wide land position and pursue the potential development of additional mines. Each of these milestones is designed to move Sunshine closer to production while preserving the flexibility to expand beyond the current base case and develop the broader potential of the Sunshine Complex that we see. In closing, you'll see the differentiating attributes of Sunshine on Slide 21. The combination of these attributes, the quality and scale of the asset, its location in a premier U.S. mining jurisdiction, the untapped growth potential and a clear path back to production is what sets Sunshine apart. The opportunity is clear, and our focus is now execution. With the financial foundation established through our IPO, we are focused on completing the drill program to support completion of the mine feasibility study, advancing our refining and antimony feasibility studies and continuing underground development and infrastructure work. On behalf of our management team and the Board, thank you to our employees, our contractors for their ongoing commitment to the Shine. Sunshine is more than an asset to all of us. It is the experience of our people, the strength of our community and a shared belief in what publicly listed Sunshine Silver Mining & Refining now represents to the world, America's must-own silver developer. Thank you for joining us today. And operator, we are now ready to take some questions.

[Operator Instructions] Our first question today comes from Carlos De Alba from Morgan Stanley.

Congratulations on the IPO. Just wanted to explore maybe, Heather, if you can give us more color on what you have in mind for mine development in the second half of the year? Are you expanding some of the galleries, your tunnels? I don't know. Any color on that would help us. And then maybe for Andre, can you provide an update on what do you see for this maybe second half of the year and early next year, if you have an idea already in terms of SG&A and predevelopment and exploration expenses so that we can calibrate what we have in our numbers?

Well, Carlos, thank you for the question. I'll start off, if that works. On the development side of things, yes, we are ramping up. We will continue to pursue development, both up in the Sterling Tunnel. So that's the Upper Country area. We are going to continue with ramp development aggressively through the second half of the year, both for development for preproduction readiness purposes as well as for exploration build-out of the Upper Country. I would say, in addition to that, we will be continuing downshaft development as well in key areas that support the first 10 years of the mine plan. So namely 3,100 level rehab efforts and development efforts there to prepare us as well as on 2,300 level and 1,900 level. So the plan is robust in terms of preparing us for that production readiness situation, and we'll continue with development efforts through this year. And I see it moving through the next 2 years as well as we advance toward production in late 2028. And Andre, over to you for addressing Carlos' question.

Yes, thank you, Heather. Carlos, yes, look, I mean, I think in terms of spending coming up, we expect our corporate G&A to level off starting in 2027. We are implementing a bunch of different processes and gearing up for -- continue to gear up for being a publicly listed company. As Heather mentioned, we have a number of exploration programs that are ramping up. And those -- that spending will continue to increase in Q3 and Q4. And then in terms of the other spending, that development spending will continue to advance. And we are focusing on getting the orders in on equipment and moving that forward. So there is a number of things that we will continue to incur costs on. But at this point, we expect the other funding that our burn rate to increase. Of course, we are working towards the feasibility study and the target there is the first half of 2027. So we would have a much better idea of the remaining spending around that time, which will be -- at which point we will give a clear updated guidance as to what spending is going to be going forward.