Good day, ladies and gentlemen. Welcome to Impact Silver's Q1 2024 period ending March 31st, 2024, financial production results conference call. Before we begin, we would like to get our disclosure statements covered by Mr. Fred Davidson's comments on the quarter's results, followed by a Q&A period. Certain statements in the following conference call regarding Impact Silver's business operations may constitute forward-looking statements. Such statements are not historical facts, but are prediction 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 it over to the President and CEO of Impact Silver, Mr. Fred Davidson.
Thanks, Jerry. This quarter was certainly interesting, to say the least. It was a combination of events, and I think it's a great opportunity to be able to go into more detail on the conference as we go ahead. The company reported CAD 5.3 million in revenues in the quarter, which CAD 4.3 million of that was from the traditional Guadalupe Mining Center, with CAD 1 million from the startup operations at the Plomosas mine. There was a net loss in the period of CAD 3.1 million, primarily from the Plomosas operation, and as we've discussed before, this is a result of being in startup, where traditionally that would've been capitalized under IFRS rules. Unfortunately, it has to be expensed.
So we had to live with it, but in the meantime, part of those expenses, CAD 2.8 million of them from Plomosas, was upgrading the facility and improving the run rate through the mill and the underground mine. So it was a very productive quarter, although not looking very attractive. The other thing we incurred as well were rising slightly in the administrative costs. That reflected more the year-end costs that ended up in the first quarter. Obviously, we were doing some marketing with the year-end at the same time, and but it was pretty well in line, other than those two, and the the accounting costs, which were related to the year-end audit, with the comparative quarter in 2023.
I think more importantly, we want to compare not necessarily 2020-2023, but rather, the quarter to the preceding quarter, because that's where we've actually going to see the real change in what we're doing. We added Plomosas, obviously, later in last year, and they wouldn't have been in those comparative quarters. And secondly, we weren't producing absolutely anything at Plomosas at that time, so the two are not really comparable. Let me go forward in any event. We spent a lot of time and money doing two things, and that is, at the Guadalupe mine, revenues and production was down, and primarily because we were rehabilitating the underground track system, and the shaft, which brings the ore to surface, and that impacted it.
We're going to see April was also a little slow, but we're seeing a fairly dramatic increase in production at that mine site in May. So the second quarter is certainly gonna look more attractive in terms of overall production. We're also have gone back into the Alacran Mine in May, and we're going to see more gold starting to come through, and the recoveries on the gold are going to be significantly higher than they were last year as a result of the change in metallurgical treatment. So that part of it for Zacualpan has been attractive. It's worked out well, and pretty well in accordance with guidance that we were looking for going forward. Plomosas is just was a different animal, and probably to explain that, Plomosas, as we say, is in the startup phase.
We did have limited production in the first quarter, and that limited production was in the sort of 70 tons a day, 60 tons a day. That is already over 100 tons a day as we gradually improve throughput, expand the mining underground, and deal with the myriad of minor disasters that the predecessors left on the project. It's coming to the way we want it to go, and I think we're going to see that going forward, that is going to improve again in this quarter. And our ultimate objective is to, by the end of this year, be at 200 tons a day, which is sort of the current mine, or rather mill for capability.
What helps in both cases, of course, is that the silver price has risen since the first quarter fairly dramatically, and interestingly enough, zinc has probably risen even more as a percentage than the silver. So both of our products are being well received in the terms of the overall market, and our productivity and our production is gradually growing. The capital expenditures we're making at Zacualpan are pretty well through. We're gonna see those pretty well finished, and this is something you just have to do every couple of years as you upgrade. And of course, we're getting to see some interesting results from underground in our exploration as well. So we're going to see that coming through as we continue our exploration program in Zacualpan, which is being quite aggressive. At Plomosas, probably even more aggressive.
We had one surface rig working for the whole quarter, and we added an underground rig that was somewhat delayed in the first quarter, primarily 'cause we had a problem with an underground water pump, and the area that it was going to be doing its principal drilling from was temporarily flooded. That's now back out. We've got that rig underground now, and we're going to see a fairly aggressive, both rigs working, on surface and underground at Plomosas. Numerous targets to drill on, and I think as you've seen from the first couple of news releases on the drilling, some very good grades coming out of the Plomosas mine. And ultimately, as we further refine and define the resource, we'll then move our rigs on to the real earlier stage exploration.
Only 600 meters of this whole district has been developed, and only partially developed, and there's a total distance of about 6 kilometers in terms of the structure that we're going to be following up. So Plomosas is gonna be a very busy year for us going forward. Other than that, I think we've had a pretty solid quarter. Not the one I wanted, but certainly, it's indicating that we're going to be where we want to be, and that is full-scale production from both mines by the year end. Now, the other thing we've done, and we've recently announced, as I'm sure you're aware, is that we're doing a financing, and the objective of that financing, quite frankly, is to accelerate the exploration on both properties with some CapEx and some working capital requirements.
As we say, we've got two very significant targets, two significant properties rather, begging for exploration, and let's accept it. Exploration is where the real value lies with a lot of people's attitude, and the targets are excellent. So we hope to be generating regular reports on our exploration going forward. I think that's about it for this sort of brief summary. The rest is obviously in the financial statements and the news release. Jerry?
Thank you for that overview, Fred. Here are some of the questions that we compiled from investors this quarter. Please feel free to send questions to inquiries@impactsilver.com, or call us directly at area code 778-887-6489. Question one for Fred and the team: Congrats on the jump in the revenue to CAD 5.3 million. What price of silver does that capture, Fred? Since it wasn't until May of this year that silver popped over $30 an ounce. Does that mean Q2 should theoretically be even better with both silver and zinc up higher?
Oh, absolutely. And what we're seeing is... And it's a little difficult to calculate what the value is, because in some of the shipments going out in the silver, they're priced at an earlier time, but recorded at a later time, as a final settlement. So the pricing varies fairly dramatically, as you can understand, in this period of time. But we're talking $22-$24 silver in the first quarter. And let's face it, the second quarter with the pricing, it looks extraordinarily good. We're seeing the production come up, and we're seeing the gold production as well start to come through in late April, early May. So I'm looking for a very positive situation there. Will it be better?
Of course, it'll be better, both in terms of tonnage, grade, and pricing.
Okay, excellent. Question two speaks about the Guadalupe mining area, with the, sorry, the Plomosas mining area. With $1 million from the start-up operation, which was acquired in April, restarted by October, what is the expected run rate for the Plomosas area? Is it... Are investors safe to take the $1 million per quarter and multiply it by four?
I think you're being kind to Plomosas, or unkind, not kind to Plomosas, rather. That CAD 1 million was based on a little over 3,000 tons for the quarter. As I say, it was a start-up period. We're now averaging a little over 100 tons a day. So we're going to probably be doing what we did in the first quarter every month going forward. So yeah, we anticipate at this point in time, we're gonna be looking more like in the CAD 10 million-CAD 12 million dollar gener- for the year.
Okay, excellent. Question three: That sounds like a ton of work, given the MD&A at Plomosas last quarter, to get it to between 150-200 tons per day by 2024, including the mine site work, infrastructure, and various above-ground investments. Fred and team, has the company gone through most of this work by Q2 of this year, or are we expecting more CapEx?
We're expecting more CapEx, and interestingly enough, that's an appropriate pun when you say a ton of work. There are things that, first of all, we had to do basically to put it back into production. And that's basically broken into threefold. Underground development, the underground development they were doing was previously poor. It would be the kindest phrase. It needed a total revamp in how to work underground, for safety issues, ground stability issues, for the fact that we wanted to change the mining method in certain cases, where they did what we call Room and Pillar. That was leaving pillars and up to 20%-25% of a particular ore body in pillars. And when you're talking between 10%-20% zinc, that's an incredible waste.
We're doing a cut and fill process, where we go out and backfill. After we've mined, we backfill with waste. That allows us to recover 100%, but doing that, you have to develop off the zone, not on the zone like they were doing. So underground, a lot of work. The other issue we ran into is their mobile equipment was kindly described as pathetic. It's taken us a lot of work to identify those pieces which we can fix economically, those which we have to replace. And then the other side is infrastructure. The electrical system was set up. It was farcical. We're, as you know, in the process of bringing in a solar array and a battery system. We've redone the wiring internally within the group, so we've got proper power underground and on surface.
The balance of things, such as the AA system, didn't work properly. AA is atomic absorption, for those who are not aware. But so there's one thing after another that we've had to address both equipment, infrastructure, and underground. And I think we've got the critical things out of the way. There's just some of these things just take time to bring to fruition. Case in point, we'll make a substantial saving once the solar array system is up and running on fuel costs. Underground, we'll make a substantial saving in that we'll recover 100% of the ore body, not 75%, once we start using the current method.
The other side is we're replacing equipment, and that included the one issue we had with the pump failing, which flooded a couple of levels that we were going to go into. And again, these things just have to be done, fixed, and operating. We're gonna be spending more money, but the more money we're spending will be going to do things like reducing our power costs, improving our recoveries. And that's a continuous thing in those mines. And, you know, the fact that we're bringing this, almost like starting a brand new mine here, but bringing it into production. And I think it'll be a fully effective operation when we hit that $150-$200 a ton, basically production at the mill.
Okay. Excellent. Question four: Can investors expect more greenfield explorations from Plomosas and Guadalupe in the next coming quarters? Those results from earlier in the year in January, and for the 10% zinc at Plomosas, and then, of course, the high-grade, 200-300 gram per ton intercepts at Kena Zone were very encouraging. When can we see more?
We're going to be seeing it very regularly. Both drills, both sites are drilling aggressively. We obviously, there's time when you take a drill down to move it, to refresh it, what have you. But we're planning a very aggressive drill program in both, at both mines for this year. And I think the shareholders will be rewarded with a little bit of patience at this point in time.
Excellent. Question five has to do with some of the overall macro picture of Mexican mining regulation and environment. Fred, mining concession times, facilitation of permit cancellation and open-pit mining concerns in Mexico is obviously a very common topic for investors that is seasoned in South America. Are IMPACT Silver's operations affected?
Yeah, as you said it correctly, it's South America, it's not just Mexico, that we're seeing these concerns. Most of our concessions are grandfathered, and that is we had them sufficiently. They've existed sufficiently long that things like the concession times are not critical to us. Permits, less than the, there's less cancellations of them than just bureaucratic hold-ups. And again, you'd almost think you're in British Columbia when you see that. It's just one of the things you have to live with. The bureaucracy is building everywhere. And you know, we're seeing that in even in what we do as a public company in Canada, you know?
I mean, right now, you're gonna get a whine from me, but we're filing things like the what we call the slavery, the anti-slavery legislation, ESG legislation, transfers to foreign companies legislation. That's in Canada, and Mexico has the same kind of thing. It's just, you have to learn to live with it, and I think we've developed that capability now that with our Mexican team, those aren't serious. The last one you mentioned was open pits. I think somebody raised that at one stage. And the fact is, we don't have an open pit other than Veta Negra, and it's more of a quarry situation than rather an open pit. And the end result is, it's not being considered as a problem in such a case as we're talking about now.
Altogether, I would say we're somewhat unique, and that is, we don't do open pits per se. Our permitting has taken time, but it's not stopped anything. The concession times, as far as we know it, are not challenged under the new legislation.
Excellent. Question six has to do with some of the legal issues and disclosures on the vendor and the acquisition. Fred, the friend team, there's a balance sheet of a due on acquisition for CAD 3.55 million. Can you explain that further than what Note 4 entails, and what's the timing on this for investors?
I guess I'd have to say, how much time do we have? What it is, is under the agreement, there was an agreement that if the company's liquidity, and that is working capital rather, declined, then the vendor would owe us the amount of what the decline was. If the working capital increased from this initial date, actually June 2022, to April 2023, then we would owe the vendor. As it is, no matter how conservatively you did the calculation, certainly the vendor owes us money, and it's a significant amount of money, some of which can be eliminated because there's certain, it's subject to certain litigation that they left outstanding, and if it's resolved, then it's not a problem to, for either of us. But if it's not, then we have a claim against them.
It's needless to say, they're resistant to it, and we've actually gone to, rather than doing something in court or what have you, we've gone to arbitration, to have an educated, a senior legal person take a look at this and try and solve it so we don't get up into a rock-throwing contest. The only contest in terms of rock-throwing is the tonnage that they sort of left in the ground or didn't leave in the ground. And quite frankly, it was a little frustrating 'cause the company. And we had to acquire the company in order to keep the permits was in worse, as in, as in bad shape as was the operation. It's just taking us more time, but it will get solved.
Okay, excellent. Last question. What's IMPACT's 2024 run rate with Plomosas and Guadalupe upsize capacity expected, especially with silver crossing $30/oz?
Yes. Well, needless to say, better start with Plomosas. We are going to increase the run rate. That's the objective from day one. The intermediate target, I'd like to think this year, is gonna be 200 tons a day. And quite frankly, if the exploration is extremely positive, we'll be looking at CapEx to expand it. The silver with Guadalupe is one that because you're underground mining, it's you can't just turn a switch and put it on. What we have done is, for instance, those drill holes that we released on Kena, they're accessible and but they're not accessible in a month. It takes about three months to develop the area safely, provide air into the area, provide services into the area.
So definitely we're going to be doing our darndest to increase the throughput, but it's a bit like, it's gonna take a good quarter at least to start moving that into even near production. And by the sort of four, five, six months, that production will be starting to hit the mill. So there's always a lag. It's not as if we can just turn the switch, but we are going to be pushing. We are going to be seeing more of that go through the mill, and that hopefully will include more of the gold as well, which is not doing too badly right at the moment either.
Okay, excellent. That's all the questions we have for today. We thank you for tuning in for Q1 2024 with Impact Silver. We look forward to obviously hosting you for Q2 2024, which will be probably mid or late August. When you have a chance, please visit our website, www.impactsilver.com, or follow us on various social media. If you have any questions, feel free to send us an email from the website or via email at inquiries@impactsilver.com. Impact Silver trades on the TSXV under IPT and on the U.S., ISVLF. We look forward to hosting you for the future calls.