Good day, ladies and gentlemen. Welcome to IMPACT Silver's Q3 2025 call, ending September 30th, Financial and Production Results Conference Call. Before we begin, we would like to go over our disclosure policy, followed by Mr. Fred Davidson's comments about the quarter's results and the 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 predictions about the future, which inherently involves risk, uncertainties, and could cause actual results to differ materially from those contained in the forward-looking statements. I would like to now turn over to President and CEO of IMPACT Silver, Mr. Fred Davidson.
Thanks, Jerry. This quarter was quite an interesting one for the company, for a variety of reasons, both operationally and financially. You know, the results for the quarter in terms of revenue was up to $10.7 million compared to $8.6 million for the comparable quarter in 2024. That improvement in revenue has obviously resulted from higher silver prices during that period. And then on the other side, the bottom line improved as well, fairly substantially. You know, we had a loss in 2024 for the quarter of $3.1 million, and the net loss in 2025 for the quarter was $0.6 million, mostly as a result of a very aggressive exploration program that we were working on during the third quarter. Highlight of the period was Zacualpan, and that's our silver-lead-zinc mine.
It's been, its revenue was $8.7 million, and that's up from $6.1 million from the prior, the comparative period. That's an 8% increase, and that was, quite frankly, with not much of an increase in ounces. It responded many ways to the rising price of silver, and as everybody knows, we're one of the sort of most highly leveraged companies to silver. Plomosas, on the other hand, was up to $7.9 million for the year to date, but it was down in the quarter, and it was just a series of those whack-a-mole things that happened in mining that made it tough for us for that quarter.
One included a flood in one of the areas of the mine that disrupted operations, and the other was some bad ground conditions that caused us for the quarter literally to move around an area that was not safe, and it meant that we couldn't access our higher grade ore for a good portion of the quarter. That meant that we saw lower tons coming through and at the same time lower grades coming through. We're now past that, and the fourth quarter is looking more substantial in terms of throughput. For the Zacualpan, it still grinds away to us and develops good tonnages and good grades. The exploration is continuing on the Knop, which is probably the real star for the moment. It's high grade, it's substantial in size, and continually gives us positive responses and recoveries.
The downside for the quarter was only on the production side. We could have actually increased more throughput, but for 84 days, one of our three ball mills was down for major repairs, and that really disrupted our dev design for production for the quarter. It's now back, it's fixed, and going forward, we expect to see more tonnage going through. So at the end of the fourth quarter, we should see more tonnage. There's always issues with the Christmas period and what have you, but it should be a good, strong quarter for Plomosas or rather for the Zacualpan. And Plomosas, I think we're finally past that area of low grades, and we're getting into some better grades, as we go towards the end of the quarter. The team on exploration, meanwhile, has been focused on two areas.
In Plomosas, we've been working on the current deposit that we're mining. That's the, let's call it the Plomosas mine, but it's also called Tres Amigos. But we've been focusing on Mina Reyes, which was never in the JORC that we acquired from the Australians. And secondly, we're starting to drill into another one called Santo Domingo. Grades are good and solid, widths are variable, and because of the very nature of the deposit, it's a little difficult to really put a hard number on it, but we're going forward. On the other hand, Zacualpan, we're into the, brand new, well, brand new, Camald, Noche Buena Carlos Pacheco area. And Carlos Pacheco, Noche Buena was, originally identified almost about nine years ago, and because of pricing and everything else, it really wasn't very attractive. It is now with the current price. We're in there.
It's got gold and silver, and we expect to see that rise as we go forward for the quarter and for the next probably six to nine months minimum. So overall, the program for exploration is going forward fairly aggressively. At the same time, we're going to see an uptick in production coming through for the fourth quarter and certainly into the first quarter of 2026. The team well organized, we're well funded. We're currently looking at a number of other private opportunities, privately held opportunities, which don't normally call us the path of Canadian companies running through Mexico. These are privately held, and because of our Mexican exposure, we have the opportunity to go identify them, and we will be over the next while. That's last but not least, we obviously raised some money. The question is, why did you raise money? There's two reasons for that.
One, it was in this business, when it's available, you tend to take it. We did do it under a LIFE, which was probably a little tough on the marketplace because people turned around and sold it because there was immediate gain for them. But we were also raising $9 million warrants that were coming due at the end of the month, so we knew we were going to be under pressure anyhow for at least a quarter. I think once we flush through those, the fact that we are sitting on over $25 million in cash, no debt, strong working capital, growth in both mines, and quite frankly on the path to looking for another acquisition or two that we've seen that are very attractive, it's just a matter of putting it together for those things.
At the same time, rationalizing some of our other activities to improve our operating costs at both mines. Jerry, over to you.
Great. Excellent summary, Fred. Here are some of the questions we compiled from investors this quarter. Again, for future inquiries, please send questions to inquiries, that's plural, at impactsilver.com or call us direct at 778-867-7909. Question one, great quarter, Fred and team, good mine operating income and turnaround, still on the net loss, but after EBITDA, it looks like 100,000 plus positive. Is this now the expected run rate at $40-$50+ dollar an ounce silver, and can investors expect better for Q4?
Q4 is always an adjustment period anyhow. So I have no idea. We run into the adjustment for depletion and accounting issues. But I would say in terms of the top line, yes, we can. And I think on that sort of operating cost issues, yes, we can. When we get down to the administrative and all those issues that the auditors come up with in terms of how we're going to deplete certain assets, etc., that's outstanding. But yeah, things are looking positive, and especially positive for the first quarter, when we'll be clear of all of that.
Mm-hmm.
Have a good run rate ahead of us, as both mines should be operating pretty well where we want them to be operating. Plomosas is a little lower in tonnage than we'd like.
Mm-hmm.
Only because of the development time, etc., and some of the projects there. For the Zacualpan, I think it's going to be running at, probably at least 10%-20%, let's say 10%, to be conservative, above our current throughput.
Okay. Excellent. Question two, again, more on the accounting adjustment side, but depreciation, depreciation and amortization seems to be running lower on both Guadalupe and Plomosas, so far this year. CAD 2 million versus CAD 2.5 million last nine months, 2025 versus 2024. Is this expected to be the new normal run rate?
That's primarily the first question probably is, for the most part, the depletion amortization relates to the capitalization that we've done, and each mine that we operate from has a different capital cost or CapEx that you have to amortize over the tons that come out of there. What's happening is, depending on where we're mining at a given point in time, you're amortizing a larger lump or a smaller lump. I can't recall the exact numbers, but I can tell you what it is: it's going to be at the Zacualpan because as we pull from one mine, maybe an extra 10%, it means another mine we're not pulling from, and that means we're not amortizing that mine as much, that other mine as much.
On the mine we are mining, of course, we're amortizing more. So it does vary, and it's going to continue to vary. It's just the very nature of that. For Plomosas, it's not the same. We're amortizing, we're mining basically from one mine, and the end result is we have a number, and we're amortizing that, tons taken out of that based on that number. So you'll probably see that Plomosas hasn't changed very much.
Mm-hmm.
That's where the Zacualpan does.
But got it. Okay. Question three, there's a nice bump of 8% on operations at Guadalupe. I think you alluded to that earlier, Fred, that, we're expecting the tonnage, throughput to increase a bit. Is that the, the most we can expect at, you know, $50 silver, or can we expect IMPACT to get to a million ounce a year once again via, you know, organic growth or expansion? And then secondary on that, what's the equivalent of the silver ounces now in, for both mines, Plomosas and Guadalupe?
That's a tough one.
Yeah.
The first one is, we are going to see the increase in throughput. I don't think next year we're going to get to a million ounces, only because as the prices go up, your definition of ore goes down, and we may not mine the same grade, but we'll be generating more revenue because we're aiming for, when we go into an area, our cutoff might be, let's say, 120 grams, and with the higher price, we might drop it to 110. So we'll be actually mining more tonnage, we'll be mining more silver, but because the prices are so much higher, you're going to have a bit of a pushback, but only because it means more dollars on the bottom line.
As for Plomosas and Guadalupe, it's really hard to take a mine that's doing zinc, lead, and silver and convert it to an effective silver. These people that use equivalents drive me nuts because, of course, silver is highly volatile, and some of these other metals aren't, and to put them in the same pot is probably a little, you know, suspect. But in any event, I think the easiest way to do it is probably compare the two revenues for the quarter. I can't do it because I'm not supposed to do it, but you can take the two revenues for the quarter.
Exactly.
Take the Zacualpan revenue, divide it by the number of ounces, and you're going to end up with a factor, and that factor you then divide into the Plomosas revenue, and that will give you what the equivalent silver production would have generated. And that's what generated, as opposed to these so-called equivalents, which are in situ and don't account for the fact that you get a heavier discount on other things other than silver. So yeah, I'd suggest they do that. I don't give you a ballpark.
Yeah. No, that's kind of what we suggest, but obviously if investors reach out to us, there are some analysts and third-party analysts and vendors and media types that's been putting into equivalency basis on base metal projects, zinc and lead ore, which, as Fred and our QP alluded to, we're not supposed to because they're technically not precious metals, but there are a lot of companies in our industry with unnamed names that do provide silver equivalent just on a revenue basis is how they're doing it. So we're happy to provide that, you know, on a personal basis, but we can't put that on a press release. It's what Fred is trying to say. Question four, you know, almost 14,000 meters drilled at Guadalupe and Plomosas, IMPACT team.
Why is it that Impact doesn't report a lot of these from the Zacualpan side and mostly on the Plomosas side?
On the Plomosas side, Q1 we had a report. Q3 we had two news releases, and Q4 we've just done a news release. As for the Zacualpan, we only did two releases, and that was on Canada Q1 and Q2. The problem being is, yes, we do a lot of drilling, but many of the assays are conducted in our lab, and because it's not a certified independent lab, we can't report them. But they are done for industrial purposes as we go forward doing our own mine designs and planning, and, believe me, we'll probably even do more meters drilled next year.
Okay. Got it. Question five relates to the last point you covered, Fred. Will there be more financing? The $60 million deal was great for the balance sheet, but really killed the momentum of the stock in September. With Plomosas seemingly running fine now, should there be any more need for cash?
No. No. In fact, that's probably why we did it when we did it. Can you stop the thing for a minute?
Yeah.
Oh, somebody took the word.
Okay.
Okay. Sorry.
Oh, go ahead. Yeah.
Yeah. As you pointed out, we didn't need the cash. This is an industry, though, that it's not always available. And secondly, it gave us the opportunity to have the cash to take on things where we didn't have to use our in sort of other alternative financings, and some of them are really dubious. I mean, you know, some of the issues that people get into, financing offshore, etc., create havocs, and there happens to be without naming a company, a major company that's in trouble right now because the Mexican government decided the way you're doing it just leaves one huge tax liability. So we try and do it cleanly. Fact is, we raise our money, we keep our balance sheet clean.
It puts us in an ideal opportunity to make acquisitions, to negotiate, to drill, and not have to worry about debt financing, etc., in the future.
Fair enough. Yeah. Bit of a short-term fluctuation, but I think long-term, the stock will pan out as silver continues to climb. Question six, good presentation format on this, new financial layout, Fred and team between the two projects, the Zacualpan, Guadalupe, and then, of course, Plomosas. What's a realistic fair cost, or a direct cost per ton that investors can expect given a run rate? I mean, the margins are, top lines are expanding, which is good, but just for Q3 purposes, Guadalupe was CAD 180/ton, top line CAD 253/ton. Plomosas was $320/ton USD, as CAD 190/ton revenue top line. The next question comes about the direct cost and selling price on both assets. Great presentation on the revenue split between Plomosas and Guadalupe, the Zacualpan.
Direct cost of $180 selling at $250 looks great at the Guadalupe. On the flip side, Plomosas looks a little high at $320 a ton and revenue at just $190 a ton. Can we expect this lower in the coming quarters?
Frankly, it's getting cleaned up now, and we're seeing higher production coming through. The operations are sort of settling down a bit, but the other side was, as well, because of the nature of this deposit, we were doing a lot more underground development to access some of the zones, and that's an investment you make in time. It can look ugly when you're doing it, but once you're into those zones, it looks a lot better. So we're going to see a fair bit of volatility with the direct cost per production ton at Plomosas for the next little while until this mine matures.
As for the Zacualpan, we're going to see we've been doing some things there that a lot of it gets written off, and that includes, we're rebuilding the shaft, we're expanding the tailings pond, and a lot of these costs, although they're generally capitalized, there's a lot of related costs that aren't. And so we got hit with that, and at the same time, we didn't get our production we wanted because, of course, the ball mill is down for 84 days, and alternative methods we use, running extra shifts, etc., just hit the line. I think we can beat both of those, costs down. Historically, the Zacualpan, it's not a cheap mine because it's underground and it's hard rock and, but it's, it happens to be a, sort of a Zacualpan. We've got a real history there.
And as I mentioned, the exploration we are drilling there underground. The underground generally gets written off. The other drilling we do for a tonnage is cap, maybe capitalized or written off as well, but it's written off as exploration. I think we can get it down to the 150 level and keep it there for a while. It's going to be primarily a function of what we're doing over the next six months because if we go into some of the newer areas, we tend to amortize those as well or not amortize them, write them off as we go. And yeah, we're aiming for about 150.
Yeah.
I think that's manageable.
Excellent. Question eight, more about the questions of carbonate replacement deposits in the area. Apollo Silver recently bought the Cinco de Mayo from MAG and Santa Eulalia, massive CRD in the area. It's getting a lot of market interest. Plomosas is right in the area in Chihuahua, Mexico. Why isn't Plomosas getting, you know, nearly as much interest and eyeballs given that it's CRD and certainly in the right area code?
You're right. It's got a good neighborhood. It's going to take time to develop it, and, you know, with the Zacualpan, it took us a number of years till it really got up and running solidly. On the other hand, I agree, Plomosas is doing quite well market-wise, etc. It's got the advantage of not having to produce, and you know this story, things go up on mystery and down on history.
Mm-hmm.
So we'll be seeing it. San Luis is hard to compare to. It's massive. It's huge. It produced, I understand, over 500 million ounces of silver or something to that effect. Yeah, and that's one of the reasons we are where we are because it's not very far away from where we are. The structures on the CRDs running up to the Chihuahua were right on strike. Yes, we got, you know, what I keep on pointing out to people is, yes, we have minor production at Plomosas and what have you, and it's designed to subsidize and sort of hopefully make a little money at least, while we do exploration on the balance of the six kilometers of property we have. And that's going to be our focus, but right now we're just judged as a production thing and small production making losses.
Nobody attributes anything to the news releases we put out on the drilling, and we put out three excellent results.
Yeah.
And, I don't think people understand that. And they also, I don't think they appreciate that CRDs are, yes, base metals, but they are also the second largest source of silver in Mexico.
That's right.
After epithermal veins. So we're there. The story will get out. People will start to appreciate 90 band. It's just we got to get rid of a couple of awards we're operating with right now.
Got it. Okay. Just to close off this quarter of questions, a bit of an open-ended question, obviously. Where do you think silver is going? You've been doing this for a long time, Fred, and, I think you touched on this briefly. Expansion, M&A or organic growth ideas?
There's some interesting things happening with silver. When the economist part of me comes out, it's a precious metal, like gold, but not like it is gold. We're seeing the Chinese being very large buyers of gold. I think they're converting U.S. dollars personally, and I think they want to back the yuan with it and make it as the second world's currency. The other side is the same Chinese have always been traditionally very oriented towards silver. So there's a bit of a speculation there. The other side of it is there's certainly an industrial demand for silver, and that, if you believe me anecdotally, that there is a shortfall of physical silver, I think, people are anticipating we're going to see further increases in the pricing.
Okay, and then just to touch on the M&A and ideas and expansion potentially?
We are looking. That's one of the reasons we did the financing, and because we have a team that we are primarily Mexican-operated, we've got good, if you will, field of people out there looking at potential things that just don't come to the apparent of our appearance of people who sort of fly into Mexico City and ask around about buying something. I think we've got some in mind right now we're looking at. You know, for every 10 you look at, one becomes attractive, but that's one of the reasons we raise money. It's our intention is to grow and to primarily silver, but we I won't turn down gold either for that matter, but our objective is to continue to build the company.
Got it. Okay. Thank you so much, Fred and team. Thank you for all the investors and interest in IMPACT Silver. For future quarters, please submit questions to me or inquiries at impactsilver.com. We look forward to hearing from you from our next call, for our yearly wrap-up on 2025. For more information, please visit www.impactsilver.com, IPT on the TSX Venture, ISVLF on the U.S. Exchange, or on Twitter at impact_silver. This has been IMPACT Q3 Production and Finance Quarterly Call. We'll see you next quarter.