Santacruz Silver Reports First Quarter 2020 Financial and Production Results
TSX.V: SCZ
FSE: 1SZ
July 14, 2020
Santacruz Silver Reports First Quarter 2020 Financial and Production Results
Vancouver, B.C. – Santacruz Silver Mining Ltd. (TSX .V:SCZ) (the “Company” or “Santacruz”) reports on
the operating and financial results from its Mexica n mining operations for the first quarter of 2020. The full
version of the financial statements and accompanyin g management’s discussion and analysis can be viewe d
on the Company’s website at www.santacruzsilver.com or on SEDAR at www.sedar.com . All amounts are in
thousands of US dollars unless otherwise indicated.
Q1 2020 Highlights
• Consolidated mining operations generated a gross l oss of $1,874 dollars including gross loss from
Zimapan of $363, and gross losses from Rosario and Veta Grande of $433 and $1,078 respectively;
• Net loss after taxes of $87;
• Consolidated cash cost per silver equivalent ounce sold $18.60 and AISC of $20.39
Carlos Silva, CEO of Santacruz, stated, "With the acquisition of Carrizal Mining now complet e our focus has
shifted to streamlining operations for improved eff iciency. Our primary focus is to get the Zimapan o perations
back to historic throughput levels – a task that ha s been made more challenging by taking the necessar y
COVID-19 precautions at the beginning of March. Ro sario’s contribution to earnings is expected to inc rease
as mining operations begin to access higher grade m aterial and efforts are made to increase throughput . The
one-time cost of shutting the Veta Grande operation s increased our cost per ounce metrics in the curre nt
quarter, but with operations curtailed these costs are not forecast to flow through to future periods. The costs
of managing an effective COVID prevention program w ill weigh on our Q2 results, but with improved silv er
prices we expect to have a strong Q3.”
Financial Results
Selected consolidated financial information for the three-month periods ended March 31, 2020 and
December 31 and March 31, 2019 is presented below:
Q1 20 20 Q4 2019 Q1 20 19
Revenue – Mining Operations 7,816 9,964 2,490
Revenue – Mining Services - - 790
Gross Profit (Loss) (1) (1,874) (1,550) (514)
Impairment - (12,202) -
Net Loss (87) (16,017) (1,846)
Net Loss Per Share – Basic ($/share) (0.00) (0.08) (0.01)
Adjusted EBITDA (1) (2,909) (3,442) (921)
(1) The Company reports additional non-IFRS measures wh ich include Gross Profit (Loss) and Adjusted EBITDA .
These additional financial disclosure measures are intended to provide additional information. See th e Company’s
MD&A filed on SEDAR or its website for a reconcilia tion of these amounts to the unaudited interim fina ncial
statements for the respective periods.
(2) Financial results from the Zimapan Mine have been recorded on a 100% basis in the Q1 2020 and Q4 2019 figures
but not in the Q1 2019 as the Company did not acquire the lease rights to the Zimapan Mine until July 2019.
Selected Operating Unit financial information for t he three-month periods ended March 31, 2020 and
December 31 and March 31, 2019 is presented below:
Q1 20 20 Q4 2019 Q1 20 19
Revenue – Mining Operations – Zimapan Mine (1) 6,532 7,235 -
– Veta Grande Project 586 1,602 1,631
– Rosario Project 698 1,127 859
Gross Loss – Zimapan Mine (363) (930) -
– Veta Grande Project (1,078) (421) (976)
– Rosario Project (433) (1 99) (328)
(1) Financial results from the Zimapan Mine have been recorded on a 100% basis in the Q1 2020 and Q4 2019 figures but
not in the Q1 2019 as the Company did not acquire the lease rights to the Zimapan Mine until July 2019.
The Company realized an average silver price of $16 .66 per ounce during Q1 2020 which represents a 10%
increase from Q1 2019 and a 2% decrease from Q4 201 9.
The Company recorded a net loss of $87 ($0.00 loss per share) in Q1 2020 compared to a net loss of $1, 846
($0.01 loss per share) in Q1 2019 and a net loss of $16,017 in Q4 2019. The net income recorded in Q1 2020
includes a foreign exchange gain of $3,366. This s ignificant matter arose as a result of the Mexican peso
weakening by 25% at March 31, 2020 as compared to D ecember 31, 2019. If this gain had not arisen in Q 1,
the Company would have reported a net loss of $3,45 3 reflecting a gross loss of $1,874 (2019 - $514) f rom
mining operations and operating expenses of $1,303 (2019 - $627). Included in the Q4 2019 net loss is an
amount of $12,202 recorded with respect to an impairment charge taken on the Veta Grande Project.
Revenues in Q1 2020 of $7,816 arose entirely from m ining operations whereas in Q1 2019 $2,490 was
generated by mining operations and $790 by mining s ervices. The significant increase in mining operat ions
revenue is a result of the acquisition of Carrizal Mining during 2019. Mining operations at the Veta Grande
Project were suspended in late February in order to facilitate capital upgrades to the processing plan t and
tailings storage facility. Prior to commencing su ch capital upgrades the Company needs to restructur e the
terms of the Contracuña Option Agreement. Discussi ons are ongoing between the parties with respect to this
matter. Given the uncertainty as to the outcome of these discussions the Company is unable to project if or
when operations will resume at the Veta Grande Proj ect.
Cash cost of sales in Q1 2020 includes mining opera tions of $9,422 (2019 - $3.575). The increase in m ining
operations cash cost of sales is virtually all rela ted to the Company’s acquired interest during July 2019 in the
leased Zimapan Mine.
During Q1 2020 the Company recorded operating expen ses of $1,303 (2019 - $627). Operating expenses
increased in 2020 reflecting the addition of the Zimapan Mine operations.
The Company recorded a foreign exchange loss of $49 6 in Q1 2019 as compared to a foreign exchange gain
of $3,366 in Q1 2020. The foreign exchange account ing policy followed by the Company in compliance wi th
International Financial Reporting Standards leads t o large swings in foreign currency gains or losses during
periods of volatile currency markets such as was experienced in Q1 2020.
Management advises that Q2 2020 financial and opera ting results will be negatively impacted by the
suspension of mining operations at the Zimapan Mine from mid-April to mid-May due to operating precaut ions
related to the Covid-19 pandemic. Management antic ipates that by Q3 operating costs and production ra tes
will begin trending back to historical levels.
Operational Results and Costs
Selected operating information for the three-month periods ended March 31, 2020 and December 31 and
March 31, 2019 is presented below:
(1 Silver equivalent ounces produced in 2020 have b een calculated using prices of $17.85/oz., $1,480/o z., $0.92/lb, $1.09/lb
and $2.80/lb. for silver, gold, lead, zinc and copp er respectively applied to the metal content of the concentrates produced
by the Veta Grande Project, Rosario Project and the leased Zimapan Mine. Silver equivalent ounces prod uced in 2019 have
been calculated using prices of $15.25/oz., $1,281/ oz., $0.94/lb, $1.20/lb and $2.92/lb for silver, go ld, lead, zinc and copper
respectively applied to the metal content of the co ncentrates produced by the Veta Grande Project, the Rosario Project and
the leased Zimapan Mine for all of 2019.
(2) The comparative figures for Q1 2019 have been resta ted from the originally disclosed amounts based on an internal review of past
metallurgical reporting practice and the adoption b y management of new procedures designed to more acc urately calculate the
relevant data .
(3) Silver equivalent sold ounces have been calculated using the realized silver prices stated in the tabl e above, applied to the
payable metal content of the concentrates sold from the Veta Grande Project, Rosario Project and Zimap an Mine
respectively.
(4) The Company reports non-IFRS measures which include Cash Cost per Silver Equivalent, All-in Sustaining Cash Cost per
Silver Equivalent, Cash Cost of Production per Tonn e, and Average Realized Silver Price per Ounce. Th ese measures are
widely used in the mining industry as a benchmark f or performance, but do not have a standardized mean ing and may
differ from methods used by other companies with similar descriptions.
Zimapan Mine
The following discussion compares production during Q1 2020 to Q4 2019 since the Company had no rights to
the Zimapan Mine production during Q1 2019.
Q1 2020 Q4 2019 Q1 2019
Material Processed (tonnes milled)
Zimapan Mine 139,903 161,071 -
Veta Grande Project 11,095 36,111 32,625
Rosario Project 17,497 22,972 10,279
Conso lidated 168,495 220,154 42, 904
Silver Equivalent Produced (ounces) (1) (4)
Zimapan Mine (5) 829,514 996,032 -
Veta Grande Project 64,870 193,748 148,616
Rosario Project 73,251 134,523 57,681
Consol idated 967,635 1,324,303 206,29 7
Silver Equivalent Sold ( pa yable ounces) (2)
Zimapan Mine (5) 626,984 612,131 -
Veta Grande Project 47,854 80,531 134,016
Rosario Project 61,111 112,806 70,825
Consolidated 735,949 805,468 204,841
Cash Cost of Production per Tonne (3)
Zimapan Mine 48.15 50.61 -
Veta Grande Project 148.36 49.06 51.68
Rosario Project 62.12 57.15 75.79
Consolidated 56.20 51.03 58.32
Cash Cost per Silver Equivalent Oun ce (3)
Zimapan Mine 16.53 18.53 -
Veta Grande Project 39.54 19.87 26.28
Rosario Project 23.47 19.11 29.39
Consolidat ed 18.60 18.75 27.40
All -in Sustaining Cash Cost per Silver Equivalent Ounce (3)
Zimapan Mine 17.57 20.19 -
Veta Grande Project 46.34 23.70 29.62
Rosario Project 29.01 26.30 33.68
Consolidated 20.39 21.29 31.07
Avera ge Realized Silver Price per Ounce (3)
Zimapan Mine 16.38 16.85 -
Veta Grande Project 17.01 17.40 14.30
Rosario Project 16.38 17.47 14.34
Consolidated 16.66 17.00 14.31
As compared to Q4 2019, the Zimapan Mine silver equ ivalent production in Q1 2020 decreased by 17%. Th e
decrease is due to the different metal price assump tions being used in 2020 for the purposes of this
calculation as compared to 2019. On a constant met al price basis using 2020 metal prices for computin g the
2019 silver equivalent production, the silver equiv alent production change is nominal. Importantly, the tonnes
of material processed in Q1 2020 decreased by 13% a s compared to Q4 2020, with this negative variance
being offset by improved metal recoveries. Managem ent is working to restore milled tonnage back to
historical levels by the end of Q3 2020 while maintaining or improving on current head grades and recoveries.
Cash cost of production per tonne of mineralized ma terial processed decreased by 5% in Q1 2020 to $48. 15/t
as compared to $50.61/t in Q4 2019. This change re flects a 17% decrease in the cash cost of productio n
while the tonnes of mineralized material processed decreased by 13%.
Cash cost of production per silver equivalent ounce sold decreased by 11% in Q4 2019 to $16.53/oz as
compared to $18.53/oz in Q4 2019. This change in u nit costs reflects a 9% decrease in cash cost of sa les
and a 2% increase in silver equivalent payable ounces produced.
Late in Q1 2020 certain senior operations staff red eployments were made with a view to increasing prod uction
back to historical levels by the end of Q3 2020 which should have a positive impact on production unit costs.
All-in sustaining cash cost of production per silve r equivalent ounce sold decreased by 13% in Q1 2020 to
$17.57/oz as compared to $20.19/oz in Q4 2019. Thi s change in unit costs reflects an 11% decrease in AISC
cash cost and a 2% increase in silver equivalent payable ounces produced.
As previously referenced management is taking steps to increase production back to historical levels b y the
end of Q3 2020 which should have a positive impact on production unit costs.
Production at the Zimapan Mine is not supported by a feasibility study on mineral reserves demonstrati ng
economic and technical viability or any other indep endent economic study under NI 43-101. Accordingly, there
is increased uncertainty and economic and technical risks of failure associated with production operat ions at
the Zimapan Mine. Production and economic variables may vary considerably due to the absence of a
complete and detailed site analysis according to and in accordance with NI 43-101.
Veta Grande Project
In March 2020 the Company suspended operations at t he Veta Grande Project in order to facilitate capit al
upgrades to the processing plant and tailings stora ge facility. The estimated time for the completion of the
capital upgrades is six months. Prior to commencin g such capital upgrades the Company needs to restru cture
the terms of the Contracuña Option Agreement to ter ms more commercially acceptable. Discussions are
ongoing between the parties with respect to this ma tter. Given the uncertainty of the time needed to conclude
this initiative or the outcome, the Company is not able to project a date for the resumption of operat ions. In
connection with this matter and other impairment in dicators, the Company recorded an impairment charge in
the amount of $12,202 against the Veta Grande Proje ct in Q4 2019.
In view of the current suspension of activities at the Veta Grande Project the Company has determined to not
provide any comparison of unit production or result s of operations to prior periods as all such compar isons are
significantly impacted by suspension of activities rendering such a comparison meaningless.
The decision to commence the production phase at th e Veta Grande Project was not based on a feasibilit y
study with mineral reserves demonstrating economic and technical viability. Accordingly, there are in creased
uncertainty and economic and technical risks of fai lure associated with this decision. Production and
economic variables may vary considerably due to the absence of a complete and detailed site analysis
according to and in accordance with NI 43-101.
Rosario Project
Operations at the Rosario Project in Q1 2020 were i mpacted by a lower than normal level of mining equi pment
availability. This matter has been addressed late in Q2 2020 with procurement of two additional sccoptrams.
Production at the Rosario Project, all from the Mem brillo Prospect, improved by 27% in Q1 2020 as comp ared
to Q1 2019. On a constant metal price basis using 2020 metal prices for computing the 2019 silver equ ivalent
production, the silver equivalent production increa se is 184% reflecting significant increases in tonn age milled
and silver head grade.
As compared to Q4 2019, production decreased by 46% in Q1 2020. On a constant metal price basis using
2020 metal prices for computing the 2019 silver equ ivalent production, the silver equivalent productio n
decrease is 38% reflecting a 24% decrease in tonnag e milled and decreased metal recoveries. Managemen t
remains focussed on increasing tonnes of mineralize d material processed at the milling facility with t he
objective of reaching 400 tpd before the end of Q3 2020 with improved head grades. The additional min ing
equipment procured for the project in the second qu arter of 2020 should result in an increase of produ ction
towards the target amount.
Cash cost of production per tonne of mineralized ma terial processed decreased by 46% in Q1 2020 to 62. 12/t
as compared to $114.80/t in Q1 2019. This positive change reflects an 8% decrease in cash cost of
production combined with 70% increase in tonnes mil led on a quarter over quarter basis.
As compared to Q4 2019 the Q1 2020 unit costs incre ased by 9% to $62.12/t. This change reflects a 24%
decrease in tonnes processed accompanied by a 17% d ecrease in cash cost of production. As referenced
above the objective management is to reach 400 tpd before the end of Q3 2020 with improved head grades .
Cash cost of production per silver equivalent ounce sold increased by 19% in Q1 2020 to $23.47/oz as
compared to $19.78/oz in Q1 2019. This change in u nit costs reflects in part a 2% increase in cash co st of
sales combined with a 14% decrease in silver equiva lent payable ounces sold. The increase in silver
equivalent payable ounces sold in 2019 is largely due to the improved head grade.
As compared to Q4 2019 the Q1 2020 unit costs incre ased 18%. The cash cost of sales decreased 10% whi le
the amount of silver equivalent payable ounces sold decreased by 24%. The decrease in silver equivale nt
payable ounces sold reflects weaker metal recoverie s in Q1 2020. This matter is being addressed by
management in Q2.
All-in sustaining cash cost of production per silve r equivalent ounce sold increased by 12% in Q1 2020 to
$29.01/oz as compared to $25.85/oz in Q1 2019. Thi s change in unit costs reflects in part a 3% decrea se in
AISC cash cost and a 14% decrease in silver equival ent payable ounces sold.
As compared to Q4 2019 the Q1 2019 all-in sustainin g unit costs increased 10%. The cash cost of sales
decreased 16% while the amount of silver equivalent payable ounces sold decreased by 24%. As reference d
above, the increase in silver equivalent payable ou nces sold in 2019 is largely due weaker metal recov eries in
Q1 2020.
The decision to commence production at the Rosario Mine and Membrillo Prospect were not based on a
feasibility study with mineral reserves demonstrati ng economic and technical viability. Accordingly, there is
increased uncertainty and economic and technical ri sks of failure associated with this decision. Prod uction
and economic variables may vary considerably due to the absence of a complete and detailed site analys is
according to and in accordance with NI 43-101.
2020 First Quarter Consolidated Production Results
Summary of Pr oduction Results 20 20 Q1 2019 Q 4 201 9 Q1
Material Processed (tonnes milled) 168,495 220,154 42,904
Silver eqv. ounce production (1) (2) 967,735 1,324,303 206,297
Silver production (ounces) (2) 345,314 77,702
Gold production (ounces) (2) 280 155
Lead production (tonnes) (2) 1,060 163
Zinc production (tonnes) (2) 3,504 538
Copper production (tonnes) 482 -
Average Head Grade (g/t Ag Eqv.) (1) 240 278 252
2020 First Quarter Zimapan Mine Production
Summary of Production Results 20 20 Q1 2019 Q 4 201 9 Q1
Material Processed (tonnes milled) 139,903 161,071 -
Silver eqv. ounce production (1) 829,514 996,032 -
Silver production (ounces) 245,344 248,953 -
Silver head grade (g/t) 77 72 -
Lead head grade (%/t) 0.73 0.51 -
Zinc head grade (%/t) 2.41 2.44 -
Copper head grade (%/t) 0.43 0.43 -
Silver recovery (%) 71.27 66.1 -
Lead production (tonnes) 913 695 -
Zinc production (tonnes) 2,303 2,591 -
Copper production (tonnes) 438 482 -
Average Head Grade (g/t Ag Eqv.) (1) 250 278 -
2020 First Quarter Veta Grande Project Production R esults
Summa ry of Production Results 20 20 Q1 2019 Q 4 201 9 Q1
Material Processed (tonnes milled) 11,095 36,111 32,625
Silver eqv. ounce production (1) (2) 64,870 193,748 148,616
Silver production (ounces) (2) 22,089 53,615 61,858
Silver head grade (g/t) 85.72 102 119
Gold head grade (g/t) 0.22 0.24 0.19
Lead head grade (%/t) 1.15 1.27 0.77
Zinc head grade (%/t) 2.07 2.23 1.89
Silver recovery (%) (2) 72.2 45.1 49.6
Gold production (ounces) (2) 47 116 82
Lead production (tonnes) (2) 120 277 134
Zinc production (tonnes) (2) 188 534 356
Average Head Grade (g/t Ag Eqv.) (1) 231 297 269
2020 First Quarter Rosario Project Production Resul ts
Summary of Production Results 20 20 Q1 2019 Q 4 201 9 Q1
Material Processed (tonnes milled) 17,497 22,972 10,279
Silver eqv. ounce production (1) (2) 73,251 134,523 57,681
Silver production (ounces) (2) 29,324 43,106 15,844
Silver head grade (g/t) 63.26 64 47
Gold head grade (g/t) 0.22 0.28 0.29
Lead head grade (%/t) 0.36 0.41 0.29
Zinc head grade (%/t) 1.78 2.02 2.09
Silver recovery (%) (2) 82.4 90.6 92.9
Gold production (ounces) (2) 84 163 73
Lead production (tonnes) 52 88 29
Zinc production (tonnes) (2) 231 379 183
Average Head Grade (g/t Ag Eqv.) (1) 169 214 196
(1) AgEqvOz = (Au*Pau)+(Ag*Pag)+(Pb*Ppb*2205)+(Zn*Pzn*2205)+(Cu*Pcu*2205)
(Pag)
Metal Prices 2020: Ag $17.85, Au $1,480, Pb $0.92, Zn $1.09, Cu $2.80
Metal Prices 2019: Ag $15.25, Au $1,281, Pb $0.94, Zn $1.20, Cu $2.92
(2) The comparative figures for 2019 Q1 have been resta ted from the originally disclosed amounts based on an internal review of past
metallurgical reporting practice and the adoption b y management of new procedures designed to more acc urately calculate the relevant
data.
About Santacruz Silver Mining Ltd.
Santacruz is a Mexican focused silver company that currently owns and operates the Rosario Project. T he
Company also owns 100% of Carrizal Mining S.A. de C .V. Carrizal Mining is a private Mexican mining
company that holds a 20% working interest in the Co mpany’s Veta Grande Project and has the right to
operate the Zimapan Mine until December 31, 2020 un der a mining lease agreement.
The Company also has rights to two exploration prop erties, the Minillas property and Zacatecas propert ies as
well as the Veta Grande Project where mining operat ions are currently suspended.
The Company is managed by a technical team of profe ssionals with proven track records in developing,
operating and discovering silver mines in Mexico. O ur corporate objective is to become a mid-tier silv er
producer.
‘signed’
Arturo Préstamo Elizondo,
Executive Chairman
For further information please contact:
Arturo Prestamo
Santacruz Silver Mining Ltd.
Email: [email protected]
Telephone: (011) (52) 81 8378 5707
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies
of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Forward looking information
Certain statements contained in this news release c onstitute "forward-looking information" as such ter m is
used in applicable Canadian securities laws. Forwar d-looking information is based on plans, expectatio ns and
estimates of management at the date the information is provided and is subject to certain factors and
assumptions. In making the forward-looking stateme nts included in this news release, the Company has
applied several material assumptions, including tha t the Company's financial condition and development plans
do not change as a result of unforeseen events, and that future metal prices and the demand and market
outlook for metals will remain stable or improve. Forward-looking information is subject to a variety of risks
and uncertainties and other factors that could caus e plans, estimates and actual results to vary mater ially from
those projected in such forward-looking information . Factors that could cause the forward-looking inf ormation
in this news release to change or to be inaccurate include, but are not limited to, the risk that any of the
assumptions referred to above prove not to be valid or reliable; there can be no assurance that the Co mpany
will be successful in either negotiating an extensi on to the lease of the Zimapan Mine or acquiring ou tright the
Zimapan Mine (including obtaining the necessary fun ding for the purchase price thereof), and therefore there
is a risk that the allocation to the Company of pro duction from the Zimapan Mine will discontinue afte r
December 31, 2020, which would result in a signific ant reduction to future production results as compa red to
the results contained in this news release; delays and/or cessation in planned work; changes in the
Company's financial condition and development plans ; risks associated with the interpretation of data
(including in respect of the third party mineralize d material) regarding the geology, grade and contin uity of
mineral deposits; the uncertainty of the geology, g rade and continuity of mineral deposits and the ris k of
unexpected variations in mineral resources, grade a nd/or recovery rates; market conditions and volatil ity and
global economic conditions; risks related to gold, silver, base metal and other commodity price fluctu ations;
risks relating to environmental regulation and liab ility; the possibility that results will not be con sistent with the
Company's expectations, as well as the other risks and uncertainties applicable to mineral exploration and
development activities and to the Company as set fo rth in the Company's continuous disclosure filings filed
under the Company's profile at www.sedar.com . There can be no assurance that any forward-lookin g
information will prove to be accurate, as actual re sults and future events could differ materially fro m those
anticipated in such statements. Accordingly, the re ader should not place any undue reliance on forward -
looking information or statements. The Company unde rtakes no obligation to update forward-looking
information or statements, other than as required by applicable law.