Thank you for standing by. This is the conference operator. Welcome to Torex Gold's Fourth Quarter and Full-Y ear 2025 Results Conference Call and Webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing Star, then zero. I would now like to turn the conference over to Dan Rollins, Senior Vice President, Corporate Development and Investor Relations. Please go ahead.
Thank you, operator, and good morning, everyone. On behalf of the Torex team, welcome to our fourth quarter and full- year 2025 conference call. Before we begin, I wish to inform listeners that a presentation accompanying today's conference call can be found under the Investor section of our website at www.torexgold.com. I'd also like to note that certain statements to be made today by the management team may contain forward-looking information. As such, please refer to the detailed cautionary notes on Page two of today's presentation, as well as those included in the Q4 2025 MD&A. On the call today, we have Jody Kuzenko, President and CEO, and Andrew Snowden, CFO. Following the presentation, Jody and Andrew will be available for the question- and- answer period. This conference call is being webcast and will be available for replay on our website.
Last night's press release and the accompanying financial statements and MD&A are posted on our website and have been filed on SEDAR+. Also note that all amounts mentioned in this call are U.S. dollars unless otherwise stated. I'll now turn the call over to Jody.
Thank you, Dan, and good morning, everyone on the line. I thought it important to start with our strategy slide here at the outset. It underpins some of the opening comments I want to make about the CEO transition that was announced a few weeks ago. As most who follow us well know, one of the key reasons Torex has been able to deliver results so consistently over the years is that we have anchored our business in systems, planning, scheduling, and executing work in very defined, clear, and thoughtful ways. These systems are in place across all aspects of our organization, not just production and maintenance work at the operations. Succession planning within Torex is no different. This is something we plan for at all staff levels of the business.
Since Andrew joined Torex as CFO in 2021, he's been an integral part of developing and executing against the strategy that has yielded very successful results to date and beyond strategy, designing and implementing the systems that have made us successful, certainly, certainly within finance, but well beyond that as well, including systems that touch project and operations, maintenance and supply chain. All of this has positioned us nicely to now actually execute on the succession plan. So this transition really is a product of planning. Planning that will deliver continuity for Torex and by extension, our shareholders. Our stakeholders should expect to see no less than the consistent results this team has delivered together over the past several years. This also means that there won't be a material shift from the strategic pillars outlined here on Slide four.
Our focus in 2026 will continue to be on surfacing the value that now sits within our expanded portfolio. First, by demonstrating the long-term potential of Morelos through de-risking, by delivering a preliminary economic assessment for the Los Reyes asset by mid-year, starting drilling at the early stage exploration projects acquired in Nevada and Chihuahua, and with the cash flow we're now generating with Media Luna behind us, aggressively returning capital to shareholders. Reflecting on the accomplishments from 2025, here on Slide five, the year was truly a transformational one for our company. We achieved commercial production at Media Luna in May and successfully ramped up ahead of plan through the year, exiting 2025 at a mining rate of 7,000 tons per day, well ahead of our targeted 6,500 tons a day.
We remain on track to achieve design levels of 7,500 tons a day out of Media Luna by mid-year, six months ahead of the schedule outlined in the feasibility study. The success of this ramp-up can be seen on this slide. You can see strong second half production as mining rates hit stride and throughput at the process plant remains strong and stable. Production is expected to remain around these H2 2025 levels going forward, noting that in this year, production is slightly weighted to the back half, and there are a couple of reasons for this. Grade, and what we're seeing at the mine through stope sequencing and achieving that 7,500 tons per day mill run rate by mid-year. Strong 2025 production, supported by a backdrop of high metal prices, resulted in record annual all-in sustaining cost margin of 51%.
Additionally, record quarterly free cash flow of $166 million enabled us to fully repay the debt we had accumulated through the Media Luna project. I want to take a moment to underscore this point here. Torex paid for Media Luna out of cash flow. No streams, no royalties, no equity raise and here we are, six months post commercial production, debt-free. Lastly on this slide, but certainly not least, our next level safety program has been appraised across the business, which is evident in the lost time injury frequency of 0.07 per million hours worked for both employees and contractors. Compare this to the most recently reported Mexican mining industry average of 3.61. 2025 has certainly marked one of the safest years on record at the Morelos Complex. We expect 2026 to be no different.
Slide six outlines our 2026 guidance, which was released last month. Gold equivalent production of 420,000 oz-470,000 oz is markedly higher than the 383,000 oz produced in 2025. This primarily reflects the full year of production from the processing plant and steady state mining rates at Media Luna this year. Costs are largely in line with the all-in sustaining costs of $1,783 per ounce gold achieved in 2025. This is elevated over previous years due to the impact that significantly higher metal prices have on the taxes, royalties to government, and the Mexican legislated profit sharing that we pay our employees. Sustaining capital expenditures are slightly higher than the $107 million spent in 2025, as you would expect, because this marks the first full year of commercial production from Media Luna.
Non-sustaining capital expenditures this year include $100 million-$105 million related to Media Luna North project costs, as well as $65 million-$ 70 million on various projects across Morelos that are centered on optimizing and driving efficiencies. One example of a project like this is the construction of a conveyor that connects the Guajes Tunnel to the Guajes Crusher. This conveyor will reduce rehandling costs by more than a dollar per ton mined from Media Luna. At our guided metal prices of $4,000 per ounce gold, $45 per ounce silver, and $4.90 copper, and the Mexican exchange rate at 19:1, we have forecasted generating $450 million of free cash flow this year.
With where metal prices are sitting today, we're now forecasting this to be upwards of $700 million of free cash in 2026. Moving on to our five-year outlook here on Slide seven, you'll note the stable production profile we expect to deliver to, through at least 2030. This outlook is also markedly improved from the previous five-year outlook of 450,000 oz-500,000 oz of gold equivalent per year through 2029. So if you normalize this year's outlook for the 2024 reserve metal prices used in the prior outlook, production would actually be closer to 480,000 oz-530,000 oz of gold equivalent. This is a market step up.
A few factors contribute to this increase, including the Media Luna ramp up being ahead of schedule, continued mine life extension on ELG Underground from ongoing exploration success, and mill throughput consistently delivering above design levels. On the subject of mill throughput, performance is outlined here on the left on Slide eight. You can see the second half performance was ahead of the design rates, even when considering the 5 days of scheduled mill maintenance we had in October. The chart on the right showcases the quick ramp up we had for gold and copper recoveries, both consistently achieving design levels of 90% and 92% respectively, and silver recoveries are also ramping up nicely to their design level of 85%. On the mining front, mining rates at both Media Luna and ELG Underground are shown here on Slide nine.
The chart on the left displays the steady ramp up at Media Luna this year. The key to unlocking the final step up to 7,500 tons a day by mid-year was the successful commissioning of the final rock breaker, the final waste pass, and the final waste conveyor this quarter, all of which have now been completed. ELG Underground mining rates have also been consistently ahead of the 2,800 tons per day we targeted last year, and even delivered a new quarterly mining record in Q4. I expect to see mining rates stay around this 2,800 tons per day through the end of this year, before reducing to more normalized levels when consistent feed is being delivered from Media Luna North at the end of 2027. Those two things go together. Further details on the progress of Media Luna North is provided here on Slide 10.
As we announced with our annual guidance release, total project CapEx is now expected to range between $108 million and $113 million, compared to the pre-feasibility study estimate of $82 million. This increase primarily reflects the decision to purchase the mining fleet outright instead of leasing it, which just made sense in the context of this record metal price environment. Underground development is progressing very well. It sits today at about 40% complete. You can see the completed development here in gray and the development planned in red. We've already started development on the north vent adit and have started on the haulage tunnel from the Media Luna side, coming in towards Media Luna North.
With the development on track and procurement sitting at 30% of orders placed, including all long lead items, we expect first mine production by year-end and then expect to quickly ramp up this new mine through 2027. Moving on to Slide 11, I'll touch on our next development project in the pipeline, Los Reyes. The preliminary economic assessment is progressing nicely and is on track to be completed by mid-year. For 2026, we have budgeted $18 million to complete the PEA, commence the PFS, and conduct 20,000 m of drilling on the property. I want to note here that delivery of the PEA is not dependent on resuming drilling activities at site, given the amount of drilling completed to date. That said, additional drilling will be required to adequately advance the pre-feasibility study. We have to conduct more metallurgical testing, some geotechnical work.
We have work to do to de-risk the resource model, and in certain areas, we're looking to upgrade more inferred resources to the indicated category. I want to make a comment here on security at Los Reyes. No different than the approach in Guerrero, the safety of our employees and contractors is the most important consideration for this project. We will not resume drilling at Los Reyes until we have confidence, complete confidence, that it can be done both safely and sustainably. That's key. We're working closely with local communities, and we're working closely with all three levels of government to create the conditions for these employees and contractors to return to their fieldwork. Lastly, our exploration program for the year is summarized here on Slide 12. The overall budget for this program has increased to a record $77 million for 2026.
Approximately $43 million of that will be attributed to Morelos, as you would expect, to conduct just over 113,000 m of drilling. Similar to previous years, the program will focus on replacing reserves and expanding resources at ELG Underground and Media Luna Cluster, with a smaller portion of the budget set aside to explore two higher priority regional targets, Atzcala and El Naranjo. I've already mentioned that $18 million has been earmarked for both exploration and study-related costs at Los Reyes. These coming months here will determine whether and the extent to which it will be spent. In Nevada, we expect to spend $12 million, primarily on 7,500 m of drilling at Gryphon, where we have the option to earn into 100% of the property.
Additionally, 2,500 m of drilling will be conducted at Medicine Springs, where I'm pleased to say we earned into 100% ownership as of January. Finally, $4 million is set aside for 5,000 m of drilling at Batopilas and early-stage targeting work at Guigui. All in, we're pretty excited about our exploration program this year. It's quite robust, with plenty of high-quality targets across the entire suite of assets. In terms of news flow, you can expect our annual reserve and resource update late March, per usual, and we'll look to provide an update on some of our exploration programs in Q2. With that, I'll turn the call over to Andrew to walk through our financial results.
Okay, thank you, Jody, and good morning, everyone. So before we dive into the financial details this morning, I did want to take a moment just to acknowledge Jody's retirement announcement. I believe I share the same sentiment as everyone on the line, that Jody has done an incredible job at delivering on her mandate as CEO. With the Media Luna project complete and a clear line of sight on production for at least the next 10 years, generating strong free cash flow and a return of capital program now in place, the company is well set up for this next stage of growth.
May I echo Jody's comments that the underlying message from my transition to CEO in June is one of continuity, and I look forward to continuing the strong relationship we've built with all of our stakeholders by building on the strategy we've been successful in executing over the past several years. Moving now on to our Q4 financial performance here on Slide 14. Our excellent second half performance and the current metal price environment resulted in record margins of 51% for the year and a record 57% for the quarter. Q4 costs were slightly higher quarter-over-quarter, primarily reflecting the first quarter of paste backfill in Media Luna, as well as the impact of higher metal prices on royalties.
Given the timing of paste commissioning, we will incur some additional costs at Media Luna through until mid-2027 as we look to catch up on the backfilling backlog incurred during the 2025 year, given the delays in completing the paste plant. The lower chart on this slide just shows a record free cash flow of $166 million generated in Q4 as Media Luna really came into its stride. Turning to our cash balance through the 2025 year are shown next on Slide 15.
With record adjusted EBITDA of $730 million for the year, enabled us to execute on a number of capital allocation priorities, including the acquisition of Reyna Silver for $27 million in cash, repaying all but $30 million of our debt balance by the end of the year, and we subsequently fully repaid our debt in January. W e also returned $44 million of cash to shareholders through a combination of dividends and share buybacks. This is in addition to the over $350 million of capital expenditure for the year, most of which was related to the completion of the Media Luna project. Turning next to Slide 16. I do want to just take a moment here to remind everyone of the cash flow seasonality that we typically see year-on-year.
While production is expected to be largely consistent quarter-over-quarter, albeit slightly second-half weighted, the first half of the year is when our heaviest tax, royalty, and profit-sharing payments are made. I wanted to just walk through briefly here some of the key cash payments that we're expecting here through that first half period. You can expect to see a 1% royalty payment, which we pay in March each year of about $12 million. Our 8.5% mining tax payment is also due in March. We expect that to be about $55 million.
We also have the annual income tax true-up, which is paid in March, and that's expected to be about $20 million this year. T his is all in addition to the regular quarterly tax installments of at least $60 million in Q1 related to fiscal 2026, as well as the quarterly 2.5% royalty. Additionally, we do have several employee payments scheduled for the first half of the year and this year, we paid about $30 million in January related to the company's long-term incentive plan. I n Q2, we'll see a $35 million payment related to the payment of our annual profit sharing in Mexico and as usual, Q3 and Q4 are expected to be our strongest cash flow quarters of the year.
Our balance sheet and liquidity position are clearly well set to fund these payments, and these are laid out next on Slide 17. As of year-end, we had about $30 million of debt remaining outstanding, and we subsequently repaid that, as I mentioned in January, so we're now sitting here debt-free. Total liquidity at the end of the year sat at $426 million, $120 million of which was in cash, and we continued to have access to our $350 million credit facility, which matures in June of 2029, as well as an accordion feature of $200 million that is available at the discretion of the lenders.
Now, being debt- free, we expect our cash position to quickly build over the coming year, especially at current metal prices, and that to be available for capital allocation priorities. Overall, we're in an excellent financial position to deliver on these, and execute on these capital allocation priorities, and these are summarized on Slide 18. Our focus remains on deploying in four key areas. Firstly, increasing mine life and expanding margins at Morelos, which we're doing so through the exploration program that Jody spoke to just a few moments ago. Growth through Los Reyes, our portfolio of early-stage exploration projects and value accretive M&A, should an opportunity presents itself. Thirdly, building on our balance sheet, up to the minimum $200 million cash. F inally, continuing to return capital to shareholders, which you can see summarized next on Slide 19.
Just to touch on our return of capital, in the second half of 2025, we returned about $44 million to shareholders through our phase I return of capital program. This is comprised of a quarterly dividend of CAD 0.15 a share, the first of which was paid in December, and coupled with some share buybacks. In total, we purchased over 800,000 shares in 2025, at an average price of CAD 57 a share. We've continued to be active on the NCIB in 2026, repurchasing over 400,000 shares at an average price of just under CAD 67 a share, and that's year- to- date. We also just last night declared our second quarterly dividend at that CAD 0.15 a share level.
We expect to continue to opportunistically buy back shares this year and have just entered into an automatic share purchase plan to enable share repurchases at times when we are in blackout period. With numerous exploration targets in the pipeline for this year, operations at ELG Underground delivering ahead of expectations and the record free cash flow generation, as well as a solid return of capital program in place, we're well set up to embark on our next chapter of growth. W ith that operator, I'd like to open the line for questions.
We will now begin the question- and- answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. We will pause for a moment as callers join the queue. Our first question comes from Allison Carson with Desjardins. Please go ahead.
Thank you, operator. Good morning, Jody, Andrew, and team, and thank you for taking my questions this morning. First of all, I was wondering if you could discuss how the security situation at Los Reyes could impact the work you've planned for 2026, and what that could mean for the overall timeline of the project?
Yeah. Thanks, Allison. That's a good question, and certainly on everybody's mind with the incidents occurring in Sinaloa over the course of this last month. I want to start by saying how saddened we are by the incident. I mean, this is a situation where the Mexican mining community really comes together. 10 men lost their lives, 10 good miners, and it's just an absolutely tragic situation. As I said in my commentary, we had plans to start drilling this year and $18 million allocated. The team here, desktop in Toronto and Vancouver, is working away on the PEA. That work continues. We expect to have the PEA ready and available to market by middle of the year, this year.
The big question on everybody's mind is, if and to the extent we're unable to get to site for a bit of a prolonged period, at what point does that start to impact the pre-feasibility study? Because, as I mentioned, we have to get to site to actually do the work and the way we're thinking about it is probably about middle of the year, this year. If the teams aren't on site doing environmental baseline work, additional drilling, get some additional samples for the geo-m et work and the hydro- G work, then the pre-feasibility study will start to be shifted out from mid 2027, down towards the end of 2027. This is not like a week-for-week, month-for-month shift, because, of course, we'll work to compress it, because we're not going to be capital constrained here.
We want to get on with building this mine, but there will be some impact if we don't have the data available to us by accessing the deposit. I will say, in terms of security situation, more in terms of the security situation more broadly, there are state-by-state nuances in security, and even within states, there are local nuances. S o that's very much the case here in Sinaloa. I will also say that when we made the decision to acquire this project, we diligenced this issue extensively. We knew what we were getting into, and my view is that that was deeply reflected in the purchase price. The outcome of the events of the last month is that government, at all levels, is now deeply involved.
They have to be. S o the work we have been doing has gained some new momentum here, to enable us to create the conditions to put our people to work and put them to work safely and sustainably. So we're optimistic that that can be achieved.
That's great. Thanks, Jody. It's very helpful to get all that color in there as well. My next question is just on Media Luna. You know, with the strong mining rates out of Media Luna in Q4, and now that we're already partway through Q1, I was wondering if you'd comment on whether we're seeing rates continue to advance ahead of schedule, and if it appears likely that the ramp-up will be completed ahead of mid-year.
I'll take that one, too, Allison. I mean, I consider the ramp-up to be complete. The difference between 7,000 tons and 7,500 tons a day isn't really that significant. It's a couple of extra loads onto the belt. The real ticket to getting it ramped up stably was bringing on that last waste pass, so we have an outlet for the waste and can start campaigning waste through the Guajes Tunnel. The other thing that has happened over the course of the last, I would say, five months, is that we've really broken the back of the paste plant. All of that infrastructure that supports backfilling is now working very well and to design rates.
The other thing that has happened is we've connected now the paste plant to the stable source of reliable energy, which is the low- voltage power line, instead of using the gen sets. So all of that bodes really well for this continued accelerated ramp-up and even ramp-up beyond the 7,500 tons a day. Feeling very confident about what we're seeing out of Media Luna from a volume perspective.
Great. Well, that's very helpful, too. That's it for me. Thank you for answering my questions, and congratulations on a great 2025.
Thanks, Allison.
Our next question comes from Lauren McConnell with Paradigm. Please go ahead.
Good morning, Jody and team. Jody, congratulations on your retirement announcement. I think I speak for most in saying we'll obviously miss you on these calls and tours. You've been wonderful, obviously, to work with from this side of things, but look forward, obviously, to continuing working with Andrew and the rest of the team. My first question comes about EPO or Media Luna North. What are sort of the critical path items to keep first production in Q4? Is it, you know, development m, long lead procurement, or infrastructure tie-ins? And where do you see sort of the highest risk in execution?
Yeah. Thanks, Lauren. That's a really good question. We see Media Luna as a very low-risk project, largely because there's hardly any construction to do. Remember, it just ties back into all of the Media Luna ore and waste handling systems. So there are three things really on the list. One is development. So I mentioned how well we're progressing on that. We have no issues with continuing at the rates we're seeing. The other is landing the long lead electrical equipment and fans and ventilation. Both the fans and the electrical equipment have been ordered. We expect those to land here in the coming months. Tying them in will be orders of magnitude more simple than the electrical and ventilation tie-ins that happened at Media Luna.
The way we are looking at it is that Q4 of 2026 for first production is a very solid forecast. We very much expect to be producing ore through the back half of this year at Media Luna North, and that will then enable us to dial back rates at ELG Underground. In terms of the overall production profile, you should be thinking about the mill as consuming 10,800 tons a day, 7,500 tons or more of that coming from Media Luna, and then the delta divided in some way that makes sense between Media Luna North and ELG Underground. Feeling very good about the progress of Media Luna North. A very, I would describe it as an uncomplicated tuck-in to the Media Luna Cluster.
Perfect. That's very helpful and then just to be clear, too, with the Media Luna North, you know, truck or tie-in, is there any impact to Media Luna proper mining rates or processing at that time?
That's actually a really good question. One of the things, as we were completing a study on Media Luna North, was the integrated mine planning with Media Luna, so that we didn't get in the way of taking stopes at Media Luna or material handling, what stope is going to be available as Media Luna North comes on. As you would expect of Torex, that is very, very tightly planned. Those two assets need to work coherently and together so that they complement one another, not get in each other's way. S o that's planned. We don't expect any impact to Media Luna production as we bring on Media Luna North.
Okay, perfect. That's great and that's it for me. Thank you.
Our next question comes from Don DeMarco with National Bank Financial. Please go ahead.
Thank you, operator, and good morning to the Torex team. Congratulations on the high free cash flow and the debt-free status. My first question on the mining rates at Media Luna. So now that you're on the cusp of achieving that 7,500 ton per day target and sooner than expected, is there potential, and do you see merit in exceeding this mining rate?
There is potential to exceed that mining rate, Don. There will come a point in time, in the not-too-distant future, that we will be talking about production from the Media Luna mine collectively, which will include Media Luna North and then eventually Media Luna East and Media Luna West. What we would do with the material is produce it, lay it on the ground, stockpile it, and feed it through the plant in the event that we face an interruption out of the mine for whatever reason. But we will be mill-constrained moving forward and so as we start to produce more from the underground, we are actually, as a management team, turning our attention to the possibility of upsizing the flotation circuits at the mill, which will be the constraint.
That, that could unlock some additional production from a finished ounce perspective at Morelos and so this is an evolving increase. First, we got to get the mines, we got to bring EPO on and get that producing to more than 10,800 tons a day, and concurrently do a study to see how much CapEx it would be to bring the mill back up to that 13,000 tons a day we used to run at when we were in open pit production, which essentially involves adding cells to the flotation circuits. So exciting times for us from a life of mine planning perspective, that I would characterize as very much as, upside only here.
Okay, that's great. That's actually... That was my next question about the mill. I mean, I think now that you're in production, really hitting your stride, it's, you know, the questions turn to the levers to optimize and upsize the operations.
Yep.
So you mentioned 13,000 tons per day at the mill, and, and we'll look forward to more, but is that kind of an, an upper limit then, or is there scenarios before that, or is it just too early to kinda know where this might head at some point in the future?
I think there are scenarios to get us from the current 10,800 tons- 13,000 tons in a stepwise incremental way. It's not something that you should think about as all at once. B ased on the information and the equipment and what we know today, you should be thinking about 13,000 in that range as an upside cap. Beyond that, we would need a new grinding circuit, which then you start to chew through your life of mine very, very quickly. Producing 450,000 oz-500,000 oz a year is already a really big mine.
Okay, thanks and then maybe just as a last question, I mean, how do you manage? You have a development team, an operations team. Do the two teams kind of work interchangeably, whether it's on development or operations, and or do you kind of redeploy the development team to work on Media Luna North? How do you kind of manage the different skill sets and sort of the skill sets that are required outside?
That's a really good question, and it will become increasingly important for us as we bring on Media Luna North and Media Luna East. We are looking to deploy our development team and our operations team as cost efficiently, as safely, and as productively as possible. I don't know that interchange is the right word, but cooperatively is definitely a word. I'm gonna give you a specific example of this. We originally, when we were doing the development on Media Luna North, had development reporting into the projects team, right? That's a normal thing to do with a new project. The project owns the project and then will be handed over to the operations once it's complete at the end of the year.
Because there were so many synergies available to us with equipment, with men, with material, with supervision, we moved the development of Media Luna North over to be hung from the operations team so that the crews could be lined up together, so that we made sure that we were maximizing productivity and minimizing costs and minimizing downtime. Just a really specific example of how we're thinking about that Media Luna deposit as a cluster, and as I said, there will come a point where we're treating it as one integrated giant mine.
Okay, great. Well, thank you. That's all for me, and good luck with the rest of the year and, congratulations again on your retirement.
Thanks, Don. Appreciate it.
Once again, if you have a question, please press star then one. As it appears there are no more questions, this concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.