Good day, ladies and gentlemen. Welcome to IMPACT Silver Q-Q1 2023 period ending March thirty-first, 2023 financial and production results conference call. Before we begin, we would like to go over our disclosure statements, followed by Mr. Fred Davidson's comments on the quarter's results and a Q&A period. Certain statements in the following conference call regarding IMPACT Silver Corp.'s business operations may constitute forward-looking statements. Such statements are not historical facts, but are predictions about the future, which inherently involves risk, uncertainties, and could cause actual results to differ materially from those in the forward-looking statements. I would like to now turn over to President and CEO of IMPACT Silver, Mr. Frederick Davidson.
Thanks, Jerry. It's been a very interesting quarter. We succeeded in a number of our objectives during the quarter, in that, we reported revenues of $5.1 million, and that represented a 10% improvement over revenue in the equivalent period last year. Part of that was the pricing obviously, but I think more than anything was a combination of higher production levels and the addition of gold production. As we've been suggesting, part of our deposit, does have a gold portion, and, we're seeing some of that adding to it, which resulted in a 7% increase in revenue per ton up to $127, compared to $118 in the prior year.
Overall, we saw that mine operating earnings before amortization depletion was $0.6 million. Most of those costs were related to the impact of inflation, but even more so, foreign exchange, and that is, under IFRS, we have to report the foreign exchange conversion and it impacted pretty severely on that. Now it works the other way, of course, when the MXN peso goes the other way, but right now the MXN peso is fairly strong. Average grade, as I said, was about 1.6 or rather 162 grams. We're going to see that sort of balance off against the addition of gold. Now where we're recovering gold, we're getting lower grades of silver.
In fact, what happens is the actual silver we're going to produce per grade isn't gonna substantially increase. We are going to see gold on top of that's gonna be obviously a multiple of the silver production. We're looking forward to that continuing over the next year, and hopefully, increasing our throughput of the gold production. Overall, as I said, the costs were up to $111, almost $112 a ton compared to $90. I say 6%, only 6% of that was the inflation in Mexico. 18% was the foreign exchange. If we see the Mexican peso soften, we'll see that ratio change fairly dramatically. During the quarter, we spent about $0.8 million on exploration and development.
The intention obviously is to expand the current resource that we're chasing. I'm supposed to call that mineral inventory. At this point in time, it's a gradual process 'cause we're chasing veins, not big structures. We add increments as opposed to dramatic tonnage. It's looking strong, and we still had a cash position of about $14.3 million at the end of the quarter. That was prior to our recently announced, oversubscribed non-brokered private placement for an additional $9 million. Financially, we've had over the last sort of four months a very successful period of time, and operationally we've hit most of the targets we wanna hit. Unfortunately, we can't deal with FX. That's something beyond our control.
I think our team at the mine has to be congratulated on the effort they've gone to and going ahead. The net loss for the period was only $0.3 million and that's fairly impressive compared to a lot of our competitors or our equivalents, if you will. The financing was designed to achieve certain things, and I'll get into that in a minute. The mill's throughput, as I said, had increased up to 38.6 thousand tons compared to 36,000 tons in Q1 2022. I think we're gonna see this gradually increase depending on where we mine, because sometimes when we're mining the areas like gold, which has a higher value per ton, the actual tonnage might decrease because the veins there are pretty tight.
The end result is the ultimate throughput in terms of revenue is better off, we're going to see some of that going forward, I think. As I said, the financing was done. We're quite pleased with it. We have funded exploration in the quarter. We're going to fund continuing exploration, we're looking forward to a program with the new acquisition, Plomosas, bringing it on as another producing mine. More importantly, like Guadalupe, it's not just a producing mine, it's the exploration potential, Plomosas has excellent exploration potential. One of the things we have to discuss about that is that so far the area has been probably explored only for about a seventh or so of the entire strike length of what appears to be the deposit.
Even where they're mining right at the moment, it's open in all four directions. This is an incredibly high-grade zinc mine, but as importantly, it's what they call a Carbonate Replacement Deposit, CRD. Carbonate Replacement Deposits are polymetallics. Polymetallics also produce other items such as silver, lead, gold, copper. Right now, with the high quality of the zinc production we get here at running between 12%-13% a ton, literally the accompanying silver, which is a couple of ounces a ton, are free. Going forward, we expect to see other areas in it where there'll be a higher percentage for the silver, and we've even had indications, I said before, of some copper and gold, which we'll be sort of looking for as an early stage target.
Production and again, exploration potential, and that's what we see as an important criteria going forward with Plomosas. That's our company, production and exploration.
Great. Thank you for the overview, Fred, for Q1 2023. Here are some of the questions we compiled from investors this quarter. Please feel free to, in the future, to send questions to inquiries@impactsilver.com or call us directly at +1-778-887-6489. Question 1: Great quarter, guys. Nice to see the increase from 400 to 430 tons per day at Guadalupe. Can investors expect similar increase level back to full capacity of 500+ for the remaining quarters in 2023?
I'm not sure we'll get to full capacity, primarily 'cause we're focusing in certain areas, such as the gold, which the veins are fairly tight but very high grade. Tonnage itself may not be the only criteria involved here. Our attitude is we want to maximize the value per ton and the overall value that we produce. We're going to focus on those. Again, the tonnage again may not rise to our ultimate tonnage, but that's only because we're mining more gold, so I won't apologize to anybody for that one.
Okay. Question two: grade increased to 162 gram per ton this quarter, as you alluded to earlier. Are we as investors expecting a higher grade across the board, despite roughly the same level of tonnage?
That's, again, a valid question. Actually I think I alluded to it. The issue we've got, when we report grade of silver, it's the silver grade only. It's not an equivalent. When we're producing from an areas that have some gold, we find that the grades tend to be a little lower 'cause it's a, it's a layer cake of a deposit where we'll see gold occurring at depth compared to the silver lead zinc. When we're down and mining a, what would be a gold vein, we're getting less silver. The grade overall may not increase, but the equivalent, unless let's use, I hesitate to use that word, silver equivalents.
Yeah.
We can live with that. What we are getting hit with is for some reason, the Mexican peso, and maybe this is the onshoring process that's been advertised so extensively, basically changing the FX or the foreign exchange, especially with the Canadian dollar. What we really saw was the impact of that foreign exchange on the balance sheet of the company and hence the income of the company. I mean, you can look at our comprehensive income for the period, and it was actually significantly positive. That's a reflection of the impact of FX primarily.
Okay. Question four: timeline on Plomosas. This has been asked in the previous quarter after the acquisition, just to keep a note. How has the acquisition closing been going? What kind of timeline can investors expect on exploration news and development news from this new asset? Lastly, when will restart of cash flow and pro-production be?
Fair question. The acquisition has closed obviously. There are some issues with the underlying quality of the information, i.e., the accounting, et cetera, that the predecessor group maintained, and it's a basically a roll up our sleeves and clean it up process, and that's taking quite a bit of time. On the operating side, many of the things we anticipated, I think we've had no surprises, let's put it that way. I think we're pretty well where we expect to be. The number of things we're doing, rebuilding a portion of the mill, we've moved the ball mill 'cause it was on broken foundations. We're moving the electrics down. We're working on the tailings pond. I can go on. There was over 21 major projects going on at the moment.
I think we're gonna be pretty well on time. That is we figured somewhere around 60-90 days for the first phase of getting things back to where they should start. Basically, we're looking out 7 months or so to where production will start to surpass what they were doing in the past. We're sort of focusing that by the end of the year, we should be doing sort of at least 50%-70% more than what the predecessor company was doing daily. By next year, we're hoping to be up into the 200-200+ tons a day with a little bit of luck and some timing. The one thing that may slow us down is we are changing the mining method. They were using what they call room and pillar.
What happens with room and pillar is you're using major support to hold the roof up, and you're leaving a lot of valuable ore sitting in those pillars, which you can never get. We're going to change our mining method in certain areas where we get 100% recovery and not 75% recovery. That process may slow us down in the feed, but ultimately lead to higher recoveries and actually lower cost per ton.
Great. leading from that question five is: What kind of run rates can investors expect in Plomosas from 2023 and roughly 2024?
2023 is going to be, if you will, experimental. I think I alluded to it. We get up to maybe 150 tons a day, maybe 125 tons a day. Part of that is doing our metallurgy, part of that is modifying the mill as we go, and part of that's modifying the mining technique as we go forward. By 2024, we're hoping to focus on about 200 tons a day, and that'll be then when we enter our second phase, and the second phase will be designed to increase this throughput again. It could take 6 months to a year at that point in time to get it up another 50%. That's gonna take a little while.
It's the nice thing about it, we're dealing with some of the highest grade zinc mines, one of the highest grade zinc mines in the world. You've got a little bit of leeway as you go forward. The other side of this, and, you know, I've got to emphasize, is that we're gonna be fairly aggressive on exploration here. The exploration is outstanding. It's basically, it just hasn't been challenged. There's a lot of potential. There's a lot of high-grade material. We're looking at two things. Are we gonna be sort of an intermediate-sized mine producing good grade material, or are we gonna be something dramatically larger in the sense that we find the deposit is much bigger than anticipated. With the grades we've got, it becomes very significant.
Yeah, that's the home run type of thing that obviously everybody hopes for. At this stage, it's gotta be we've got to spend some serious time and money looking for the potential here, and that's what we will be doing next year.
Perfect. That kinda leads into the next question. Question six, congrats on the financing recently, well timed and well executed. What's the expected use of proceeds and specifically about exploration? Will IMPACT be drilling more than 20,000 meters versus the last few years?
I think we'll probably drill about 20,000 meters. Part of that's gonna be focused at Plomosas. Part of that is gonna be chasing targets we have at Zacualpan. It's, it's one of those things we do. Once you get beyond that, the logistics get a little difficult. A, have you got enough competent geologists to look at the core when it comes up to make the decisions, the core cutting, the assaying, the sampling, and the interpretation. Too often, you end up drilling a whole program before you get the assays, and that really doesn't allow you a lot of perspective on what you've done. We're hoping to be a little more patient about it. For instance, we're drilling one project at Zacualpan right now. Ultimately, we think it's gonna be about a 10-hole program.
We're stopping at five, get all the results in, reinterpret, and then go complete the balance of the five. Meanwhile, the drill will go to another site. It's gonna be a little more balanced. We're not rushed. We've got high-quality targets. We've got high-quality production.
Okay. Question seven, given 17 plus years of operations and longer, with the team, of IMPACT Silver in Mexico, what is your take on recent mining law changes, and how will that affect the two operations in Mexico?
Well, that's a question I'm hard-pressed to answer. There's certain aspects of the legislation that we understand that are not allowed to be retroactive, and I believe that refers to things like concessions, et cetera. There's certain aspects of the legislation which talks about environmental and social issues, and we've always supported that type of issue. I think some of it is perhaps ill-considered, or not or drafted by people who are not very knowledgeable, let's put it that way. You know, we don't object to some of that at all. In fact, I think we're ahead of them on some of the things they designate. How will it affect us? We don't know.
Right now, people are filing what they call amparos, and that includes the government, the Congress rather, that includes major companies, what have you. What they are is asking the Supreme Court to reconsider some of the legislation because it, A, offends the Constitution of Mexico. It offends what is now the replacement act for the North American Free Trade Agreement. There's a bunch of things, so it's up in the air. That's the trend we're seeing, unfortunately, throughout all of Latin America and many African states where legislation is put in place, maybe rushed or ill-considered. I'm not sure even if the legislation will pass. From what our understanding, it will be going to the Supreme Court who are challenging the legality of the legislation in the first place.
Our job is to recognize what could potentially be the issues and address them, and we will.
Okay, last question. With Plomosas and obviously increased exploration, expansion, taking time and resource from, some of the other assets, what is the plan for Capire that's been in discussion the last few quarters?
Yeah, that's fair enough. Capire is sort of the second sister to Plomosas, That Plomosas has incredibly high grades, and it's in a very mining-friendly location. It's got a lot of things going for it. It's... Right now, our knowledge of the deposit suggests that it's substantially larger and higher grade. Obviously, it's going to have our focus for the next while. Capire is a little more price sensitive, grade sensitive, and it's one of those on its own, is a standalone operation. The CapEx isn't substantially different in terms of what we pay. We're seeing the price of some of the metals at Capire jump up and down. The variances are huge.
Until we're comfortable with the price or until we can do something such as hedge or sell forward a position there, Capire has to be second to Plomosas. The right time, right place, we'll press the button and go for it. At this point in time, it has to wait.
Okay, great. That's all the questions we have for this quarter. We thank everyone for joining us for Q1 2023 financial and production results for IMPACT Silver Corp. Again, if you have any further questions or inquiries, please feel free to send us an email or a question to inquiries@impactsilver.com or call us directly at +17788876489. You can always visit www.impactsilver.com or check us out on Twitter and various social media platforms under Impact_Silver. We thank you for your attention. We look forward to talking to you next quarter. Thank you.