Santacruz Silver Reports Fourth Quarter / Year-End 2017 Financial Results
TSX.V: SCZ
FSE: 1SZ
May 1, 2018
Santacruz Silver Reports Fourth Quarter / Year-End 2017 Financial Results
Vancouver, B.C. – Santacruz Silver Mining Ltd. (TSX.V:SCZ) (the “Company” or “Santacruz”) reports on its
financial and operating results for the fourth quarter (“Q4”) of 2017 and for the 2017 fiscal year. The full
version of the financial statements and accompanying management discussion and analysis can be viewed on
the Company’s website at www.santacruzsilver.com or on SEDAR at www.sedar.com. All financial information
is prepared in accordance with IFRS and all dollar amounts are expressed in thousands of US dollars,
except per unit amounts, unless otherwise indicated.
“In order to address the operational challenges experienced during 2017 the Company appointed Carlos Silva
in November as its COO. Mr. Silva is a well-known and highly respected Mexican mining engineer with more
than 30 years’ of experience working in the mining industry in Mexico, the last 17 years of which were in senior
management roles.” said Arturo Préstamo, President and CEO. “Under Carlos’s leadership our focus in 2018
at both Veta Grande and Rosario will be to increase production throughput and improve the head grade while
concurrently completing a surface drilling campaign of approximately 20,000 metres at the Veta Grande Project
and Zacatecas Properties. Initial steps have been taken to deliver on these goals.”
Selected operating and financial information for the three months and years ended December 31, 2017 and
2016 is presented below:
Three months ended Dec 31, Years ended Dec 31,
2017 2016 2017 2016
Financial
Revenue – Mining Operations 1,292 1,874 7,816 11,812
Revenue – Mining Services 3,580 - 3,580 -
Gross Loss (5) (451) (1,896) (5,156) (51)
Impairment (10,445) 1,073 (20,079) (15,615)
Net Loss (10,012) (3,646) (22,906) (18,506)
Net Loss Per Share – Basic ($/share) (0.06) (0.02) (0.14) (0.14)
Adjusted EBITDA (5) (1,435) (1,560) (5,297) 580
Operating (1)
Material Processed (tonnes milled) 30,974 42,746 181,073 117,962
Silver Equivalent Produced (ounces) (2) 139,670 200,122 865,459 928,467
Silver Equivalent Sold (payable ounces) (3) 94,204 166,734 643,767 935,158
Production Cost per Tonne (4) 86.49 72.33 63.74 79.59
Cash Cost per Silver Equivalent ($/oz.) (4) 32.38 23.97 23.07 13.69
All-in Sustaining Cost per Silver Equivalent ($/oz.) (4) 38.53 26.15 27.56 16.82
Average Realized Silver Price per Ounce ($/oz.) (4) 16.73 16.55 17.06 17.23
(1) The Veta Grande Project commenced commercial production effective October 1, 2016 and therefore is not included in
the first, second and third quarter 2016 operating results.
(2) Silver equivalent ounces produced in 2017 have been calculated using prices of $16.00/oz., $1,150/oz., $1.00/lb. and
$1.15/lb. for silver, gold, lead and zinc respectively applied to the metal content of the lead and zinc concentrates produced
by the Rosario Project as well as by the Veta Grande Project. Silver equivalent ounces produced in 2016 have been
calculated using prices of $14.50/oz., $1,100/oz., $0.76/lb and $0.71/lb for silver, gold, lead and zinc respectively applied
to the metal content of the lead and zinc concentrates produced by the Rosario Project during the first, second, and third
quarters of 2016, and the Rosario Project as well as by the Veta Grande Project during the fourth quarter of 2016.
(3) Silver equivalent sold ounces have been calculated using the realized silver prices stated in the table above, applied to
the payable metal content of the lead and zinc concentrates sold from the Rosario Project and Veta Grande Project.
(4) The Company reports non -IFRS measures which include Production Cost per Tonne, Cash Cost per Silver Equivalent,
All-in Sustaining Cost per Silver Equivalent and Average Realized Silver Price per Ounce. These measures are widely
used in the mining industry as a benchmark for performance, but do not have a standardized meaning and may differ from
methods used by other companies with similar descriptions. See ''Non-IFRS Measures'' section, below for definitions.
(5) The Company reports additional non -IFRS measures which include Gross Profit (Loss) and Adjusted EBITDA. These
additional financial disclosure measures are intended to provide additional information. Refer to the ''Non-IFRS Measures
– Additional Information'' section for a reconciliation of Mine Operations Income (Loss) and Adjusted EBITDA to the
quarterly financial statements.
(6) Average realized silver price per ounce is prior to all treatment, smelting and refining charges.
2017 Corporate Highlights
Settled in full the balance owing to JMET, LLC under the JMET Note
Amended the option agreement with Contracuña so that the Company now has the right to acquire
outright the Veta Grande Project
Entered a binding letter of intent (the “LOI”) with Carrizal Mining S.A. de C.V. (“Carrizal”) wherein Carrizal
may earn 20% of the Veta Grande Project and Zacatecas Properties by, among other things, funding
the increase in milling capacity at the Veta Gran de Project to 750 tpd as well as funding an exploration
program at the Veta Grande Project and Zacatecas Properties.
Entered an agreement (the “Mining Services Agreement”) with Carrizal for the provision of certain mine
development, metallurgical and geo logical consulting services as well as other administrative services.
Management expects that the Mining Services Agreement will generate approximately $0.75 million of
net cash flow to the Company on a monthly basis.
“Although the two agreements made with Carrizal occurred in Q4 2017 the benefits of these agreements are
being realized as we enter Q2 2018. The Veta Grande milling facility now has a capacity of 750 tpd and we have
cash on hand of approximately $2.7 million.” stated Arturo Préstamo, President and CEO.
Financial Results
2017 Annual Results
The Company recorded a net loss of $22,906 ($0.14 per share) for the year ended December 31, 2017 compared
to a net loss of $18,506 ($0.14 per share) for the year ended December 31, 2016. The net losses in both years
included significant impairment charges, $20,079 in 2017 and $15,615 in 2016, related in both years to
dispositions of certain mineral properties and in 2017 to a charge ($14,975) to the carrying value of the Rosario
Project. The 2017 financial results include revenues and cost of sales relating to the Mining Services Agreement
with Carrizal. There were no such revenues and cost of sales in 2016.
Revenues in 2017 of $11 ,396 include mining operations of $7,816 (2016 - $11,812) and mining services of
$3,580 (2016 - $nil).
The 2017 mining operations revenue was generated in approximate equal amounts from the Veta Grande Project
(47%) and Rosario Project (53%) whereas in 2016 mining operations revenue related mostly to the Rosario
Project ($10,922). The decreased Rosario Project revenue is primarily the result of less tonnes milled, lower
silver and zinc head grade and lower silver recovery. During Q4 management took the decision to suspend
mining operations at the Cinco Estrellas Property and Rosario Mine and is focusing ongoing mining activity at
the Rosario Project on the Membrillo Prospect. Moving forward through Q2 of 2018 management expects that
the Membrillo Prospect will operate at approximately 350 tpd.
With respect to the Veta Grande Project, revenues were lower than expected as the head grade of the material
sent to the milling facility was largely sourced from mineralized material produced from previously mined stopes
which proved to have inconsistent grade and an overall lower grade than anticipated.
The gross loss from mining operations in 2017 was $6,012 (2016 – loss of $51) while the gross income from
mining services was $856 (2016 - $nil). The cost of sales in 2017 for mining operations was $13,828 (2016 -
$11,863). The increase in the mining operations cost of sales is largely a result of a full year of operations at the
Veta Grande mine as compared to three months in 2016 as it commenced commercial production in the fourth
quarter of 2016. The cost of sales for mining services was $2,724 in 2017 (2016 - $nil). All of the revenues and
cost of sales related to the Mining Services reported in 2017 occurred in Q4 2017.
Q4 2017 Results
The Company recorded a net loss of $10,012 ($0.06 per share) for the fourth quarter of 2017 compared to a net
loss of $3,646 ($0.02 per share) for 2016. The net loss for Q4 2017 includes an impairment charge of $10,445
recorded against the carrying value of the Rosario Project.
Revenues in 2017 of $4,872 include mining operations of $1,292 (2016 - $1,874) and mining services of $3,580
(2016 - $nil).
The 2017 mining operations revenue was generated as to $482 from the Veta Grande Project and $805 from the
Rosario Project. The Veta Grande Project revenue was impacted by the suspension of milling activities for most
of November as requested by SERMANAT and by lower grade mill feed than expected. The Rosario
Project revenue is primarily the result of lower grade silver material being fed to the mill.
The gross margin from mining s ervices amounted to $856 (2016 - $nil) while the gross loss from mining
operations was $1,307 (2016 – loss of $1,896). The cost of sales in Q4 2017 for mining operations was $2,599
(2016 - $3,770) is largely due to processing less mineralized material in the 2017 quarter. There were no mining
services revenues or cost of sales in 2016.
Operational Results and Costs
Veta Grande Project
Due to the fact that the Veta Grande Project only commenced commercial production on October 1, 201 6 the
following discussion compares Q4 2017 to Q4 2016 as a year-over-year comparison would not be relevant.
In Q4 2017 silver equivalent production from the Veta Grande Project decreased by 35% (35,386 oun ces)
compared to Q4 2016. The decrease reflects a 32% decrease in tonnes milled largely caused by the temporary
milling suspension imposed by PROFEPA in November 2017. As compared to silver equivalent production in
Q3 2017, the Q4 2017 production decreased by 37%, again largely due to the temporary milling
In Q4 2017 the cash cost of production per tonne of mineralized material processed decreased by 8% to $67.85/t
as compared to Q4 2016. The Q4 2017 unit cost would have been lower if not for the temporary suspension of
milling operations for most of November 2017 pursuant to an order from PROFEPA.
Cash cost of production per silver equivalent ounce sold during Q4 of 2017 increased by 22% in 2017 to
$36.18/oz as compared to $29.66/oz in 2016. As with the unit cost of production per tonne the Q4 2017 results
were negatively impacted by the temporary suspension of milling activities in November pursuant to an order
from PROFEPA. Further, the cash cost of production per silver equivalent ounce sold also reflects a combination
of lower grade zinc and lead mineralized material being processed in Q4 2017 together with lower metal
recoveries for gold, lead and zinc being realized as compared to 2016. The primary source of mill feed in Q4
2017 was mineral ized material from previously mined stopes. This material ultimately proved to have an
inconsistent head grade resulting in an overall lower head grade than expected.
All-in sustaining cash cost of production per silver equivalent ounce sold increased by 38% in Q4 2017 to
$43.62/oz as compared to $31.65/oz in 2016. This increase in unit costs occurred largely for the same reasons
as described above with respect to the cash cost of production per silver equivalent ounce sold.
Rosario Project
2017 Annual Results
In 2017 silver equivalent production from the Rosario Project decreased by 47% (385,765 ounces) compared to
2016. The decrease reflects a 14% decrease in tonnes milled combined with a 66% decrease in silver head
grade. The decreased tonnage milled reflect s inconsistent availability of mining equipment due to mechanical
failures that were not remedied on a timely basis because of working capital constraints. The decreased head
grade is the result of greater than anticipated mining dilution at the Cinco Estr ellas Property and an extended
period during which development material was the primary source of mineralized material being fed to the mill
from the Membrillo Prospect. Currently sufficient development has been completed that mineralized material
sent to the milling facility will be sourced from mining stopes. The mining dilution experienced at the Cinco
Estrellas Property led to management’s decision to suspend operations there during Q4 2017. Similarly,
management suspended operations in Q4 at the Rosario Mine pending further exploration programs to develop
additional resources.
Cash cost of production per tonne of mineralized material processed decreased by 11% in 2017 to $72.38/t as
compared to $81.17/t in 2016. This positive change in unit costs re flects cost savings measures implemented
by management during 2017.
Cash cost of production per silver equivalent ounce sold increased by 79% in 2017 to $21.83/oz as compared to
$12.18/oz in 2016. This change in unit costs reflects in part a decrease of 66% in the silver grade of the
mineralized material processed offset by a 28% reduction in cash costs of production. The decrease in head
grade is for the reasons referenced above.
All-in sustaining cash cost of production per silver equivalent ounce sold increased by 69% in 2017 to $26.03/oz
as compared to $15.42/t in 2016. This change in unit costs occurred largely for the same reasons as the cash
cost of production per silver equivalent ounce sold increases as described above.
Q4 2017 Results
Cash cost of production per tonne of mineralized material processed increased in Q4 2017 to $111.21/t as
compared to $69.67/t in 2016. This change in unit costs reflects a loss of economies of scale from processing
fewer tonnes of mineralized material plus costs incurred in connection with the suspension of mining activities at
the Cinco Estrellas Property.
Cash cost of production per silver equivalent ounce sold increased by in the Q4 2017 to $29.80/oz as compared
to $18.60/oz in 2016. This change in unit co sts reflects a lower silver grade (35%) and a lower silver recovery
(11%) offset by a 5% decrease in cash costs of production.
All-in sustaining cash cost of production per silver equivalent ounce sold increased in the fourth quarter of 2017
to $35.09/oz as compared to $20.96/t in 2016. This change in unit costs occurred largely for the same reasons
as the cash cost of production per silver equivalent ounce sold increases as described above.
About Santacruz Silver Mining Ltd.
Santacruz is a Mexican focused silver company with two producing silver projects (Rosario and Veta Grande)
and two exploration properties including the Minillas property and Zacatecas properties. The Company is
managed by a technical team of professionals with proven track records in developing, operating and discovering
silver mines in Mexico. Our corporate objective is to become a mid-tier silver producer.
‘signed’
Arturo Préstamo Elizondo,
President, Chief Executive Officer and Director
For further information please contact:
Arturo Prestamo
Santacruz Silver Mining Ltd.
Email: [email protected]
Telephone: (604) 569-1609
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 constitute "forward -looking information" as such term is used
in applicable Canadian securities laws. Forward -looking information is based on plans, expectations and
estimates of management at the date the information is provided and is subject to certain factors and
assumptions. In making the forward-looking statements included in this news release, the Company has applied
several material assumptions, that the Company's financial condition and development plans do not change as
a result of unforeseen events, that third party mineralized material to be milled by the Company will have
properties consistent with management's expectations, that the Company will receive all required regulatory
approvals, and th at 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 cause plans, estimates and actual results to var y materially from those projected in such forward -looking
information. Factors that could cause the forward -looking information 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 prove not to be valid or
reliable, which could result in lower revenue, higher cost, or lower production levels; delays and/or cessation in
planned work; changes in the Company's financial condition and development plans; delays in regulatory
approval; risks associated with the interpretation of data (including in respect of the third party mineralized
material) regarding the geology, grade and continuity of mineral deposits; the possibility that results will not be
consistent with the Company's expec tations, as well as the other risks and uncertainties applicable to mineral
exploration and development activities and to the Company as set forth 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-looking
information will prove to be accurate, as actual results and future events could differ materially from those
anticipated in such statements. Accordingly, the reader should not place any undue reliance on forward-looking
information or statements. The Company undertakes no obligation to update forward -looking information or
statements, other than as required by applicable law.
Rosario Project
The decisions to commence production at the Rosario Mine , Cinco Estrellas Property and Membrillo Prospect
were not based on a feasibility study of mineral reserves demonstrating economic and technical viability, but
rather on a more preliminary estimate of inferred mineral resources. Accordi ngly, there is increased uncertainty
and economic and technical risks of failure associated with this production 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.
Veta Grande Project
The decision to commence production at Veta Grande Project was not based on a feasibility study on mineral
reserves demonstrating economic and technical viability. Accordingly, there is increased uncertainty and
economic and technical risks of failure associated with this production decision. Production and eco nomic
variables may vary considerably due to the absence of a complete and detailed site analysis according to and in
accordance with NI 43-101.