Hello, and welcome to Virtual Investor Conferences. My name is Scott Powell, President of Skyline Corporate Communications Group LLC. On behalf of OTC Markets and Skyline Corporate Communications Group, we are very pleased that you have joined us for the second day of our Precious Metals & Critical Minerals Conference. The next presentation is from Silverco Mining. Please note that you may submit questions for the presenter at any time. You may also view the company's availability for one-on-one meetings by clicking Book a Meeting. At this point, I am very pleased to welcome Tara Hassan, Executive Vice President of Corporate Development with Silverco Mining. The company trades on the OTCQB Venture Market under ticker symbol SICOF, and also trades on the TSXV under ticker symbol SICO. Welcome back, Tara.
Thanks so much, Scott, and thank you to the OTC for putting this platform on. Great to reconnect with the audience, and hopefully, some of you have been following us since we participated in this back in the summer and can keep track of some of our execution milestones. It has been a pretty exciting first year for us, having just listed last year in October. I will walk you through what the next year looks like. First, I will take you through the forward-looking statements which I would encourage you to read at your leisure. Why Silverco? Our vision when we launched was to create a 10 million ounce plus per year silver producer within three years.
I think you will hopefully see by the end of the presentation today that we are well on our way there with two assets in our portfolio that are going to be in production by the time we exit 2026 and growing that production profile. Both our assets are located in Mexico. We have the Cusi Mine in Chihuahua and the La Negra Mine in Querétaro. Both of these are Tier 1 jurisdictions in Mexico with access to great labor, infrastructure, and all the things you would want to see to have a successful mining operation. We have developed and put in place a top-notch team, both at the executive level, operational level, and also at the board level. I think that the biggest takeaway I hope you leave here today with is just how quickly we will be growing our production and where we sit relative to our peers.
I think a big part of that is due to how new we are and also people looking for us to execute on what we have laid out. I think we have developed a great track record over the last year of our ability to execute and, hopefully, over the next few months as you follow us, you will see us to continue to execute on both of our operational assets. On the team side, as mentioned, we have put together a top-notch team. We have deep expertise in international mining and also in the Mexico silver sector. Mark Ayranto, our President, CEO, and Director, is a mining executive with a strong history of operational success behind him. Victoria Avila most recently became our CFO at the end of September. She was a former CFO of JDS Energy & Mining, which is an engineering and contracting company out of Canada.
She has extensive experience in operational roles and also within Mexico, where they operated a few projects, and through her time at Scotiabank and Export Development Canada, fluent in Spanish, and has been a real great addition to the team. Nico Harvey is our VP Project Development. He is responsible for all the great work that we have done on advancing these projects to date. A mining engineer with experience with underground and open pit. Most recently, Jesus Velador joined us as VP Exploration.
He has got more than 25 years' experience in near mine brownfields and greenfields discoveries in Mexico and has his name besides some of the most notable projects that have been on the map there in Mexico over the last decade or so. And myself, I joined from SilverCrest, where we sold to Coeur Mining back in 2024, and an equity analyst and mining engineer by background.
On the board side, we have Gary Brown, who was the former CFO of Wheaton Precious Metals, a deep history in the mining sector and in the silver side. Gregg Bush is currently the COO of Heliostar. He has more than 40 years' experience and five mines built and operated under his belt in northern Mexico, which has been a huge support for us as we have advanced these projects. Tim Sorensen is one of the founders and was key to putting this all together. He has more than 25 years' experience on the institutional equity sales side, so brings a lot of strength from the capital market side. And George Paspalas is an Advisor. Many of you would know him from his days as CEO of MAG Silver prior to the sale to Pan American Silver and at Aurizon prior to their sale to Hecla.
Combined, we have, as I mentioned, a great team, both at the executive and board level, and that depth of expertise extends down to our operational teams down in Mexico as well. From a corporate structure perspective, we remain with a very tight share count with about 54.4 million shares outstanding and about 61 million fully diluted. We are sitting at about a CAD 500 million market cap today and just shy of CAD 450 on a Canadian currency enterprise value basis. And we have got some great institutional shareholders in the mix. Eric Sprott is one of our largest investors, and we have got a great list beyond in that other 70% of the donut there.
We have done one public raise back in January at the height of the silver market and the rest of our raises have been done privately through the combinations of both the Nuevo deal, which brought in La Negra, and also privately when we had started off with the Cusi asset. As I mentioned, the biggest takeaway today I would like you all to lead with is how close we are to a cash flow, and not just cash flow, but meaningful cash flow. As mentioned, we will be exiting 2026 with two producing mines. We have got La Negra, which we closed on in May of this year.
It is currently producing at 55% of its 2,500 tonne per day capacity, and in the near term, we are looking to execute on improvements on the capital side, and to increase capacity by the end of the first half of 2027.
We will be exiting that in that first half of the year at commercial production and pushing production on La Negra. At the Cusi Mining Complex, we are currently undertaking a mine and a mill restart. We have contractors underground at two of the zones there, and the mill restart is very well advanced and we are targeting first concentrate production in Q4 2026, and again ramping up through the first half of 2027. Combined, these assets offer a great foundation for growth and they offer a very significant opportunity to be exposed to silver. Between H2 2026 and 2030, we are forecasting production growth of more than 700%, and 73% of that revenue is going to be driven by silver alone. As you will see as we walk through this presentation, that really puts us in a top-tier class in terms of our peers.
On an average production basis, we are looking to deliver just shy of 6 million ounces silver equivalent a year. At reasonable metal prices, assumptions of about $50 an ounce silver, we would be delivering free cash flow close to $80 million a year. On a peak basis, we would be delivering over 7 million ounces of silver equivalent ounces and free cash flow north of $120 million a year. This is a pretty exciting opportunity, but we still think we have some room to grow on these assets, and I will walk through where some of those optimization opportunities are throughout both of these projects.
When we look at where we land on a valuation basis, we are trading at the bottom of our silver peers on both a P/NAV and on a 2027 estimated price to cash flow, and this in our view, presents a very compelling opportunity to enter as we look to execute operationally on both of these projects. Looking at just a smaller segment of our peers and just looking at our Mexican peers, we are trading at a 60% discount to the average EV for 2027 production ounce. Again, that demonstrates on another valuation metric just how discounted we are, and we think that valuation gap will close as we deliver on these projects. As mentioned, we are sitting at about 73% silver revenue, and that puts us in the top three of the silver peer group on an exposure silver basis.
It is getting harder and harder to get exposure to pure play silvers, and Cusi on its own is sitting at 90%, which is a really attractive exposure. Every $10 ounce of silver adds about $150 million to our consolidated NPV. You can see as we get back to those prices that we saw earlier this year, just what a big impact that could have on our NPV on a consolidated basis. Diving into La Negra, as I mentioned, this is in Querétaro, which is north of Mexico City. It is one of the safest states in Mexico. The mine itself has more than 30 years of operations.
It was started by Peñoles, back in the 1970s and was operated for more than 20 years continuously and then fell into the hands of Aurcana. Then we acquired the asset from some private owners, which have continued on with the company and are part of our executive team down in Mexico. They restarted this project in 2024, and for us where we were able to identify an opportunity was our ability to bring the operational knowledge and also access to capital markets to help fund them through that restart. Importantly, because of the long history here, it has incredibly well-defined metallurgy. We know how to recover the metal once we've got the right equipment in place, and I'll walk through some of those capital improvements that we're doing on the mining side.
We have a lot of confidence in our ability to execute on the ramp up to the full capacity by the end of H1 2027. To do all of these improvements, it requires a low capital, so only about $20 million through the end of the first half of 2027, and that's largely funded through cash flows. Importantly, as well, this is a large underexplored land package. It's on the prolific Sierra Gorda silver belt, and there's been limited modern exploration with most of the drilling over the last two decades focused on infill versus exploration. As mentioned, we acquired this project in Q1 of 2026. It closed in Q2. We issued shares. We assumed $3 million in net debt, and we have some deferred payments that will occur in Q1 of 2027.
Since the transaction closed, we've been really focused on operational improvements and we're seeing some very significant gains there on both silver grades that's being mined and on recoveries in the plant. The next big sort of step change for us is going to be on executing on these capital investments over the next two quarters. Importantly, we came out with a PEA relatively recently, and this marked the first opportunity for us to talk about our production profile on a consolidated basis, as previously we didn't have a technical or a mine plan PEA in place. We just had a technical report. This PEA with a $50 base case silver price generates an NPV of $329 million on an after-tax basis and an after-tax IRR of 131%, average annual production of just north of 4 million ounces at AISC of sub $25 over an 8.2-year mine life.
Importantly, it'll point you towards the funding required of $12.5 million. So after the cash flows that we generate at La Negra over the next two quarters, that total funding off the balance sheet required at $50 per ounce is only $12.5 million, and that dips down to sub $5 million at prices closer to where we've seen recently for spot prices. This is a really attainable project for us to execute on these operational improvements, and you'll see here we have a production profile that sees us generating increase in cash flow and production as we move towards the end of the mine life. We think there's some really good opportunities here for us to move some of that production forward with some of the technical work that we're undertaking over the next 12 months, and I'll walk through that.
As mentioned here, you will see that sub $5 million at spot prices from a funding perspective, and you can see the significant after-tax cash flows that come as we mine into the higher-grade portion of La Negra in those latter years. In terms of the key steps to increasing production, the first step is improving the mining fleet performance. What we are doing there is a combination of improving our maintenance practices and also acquiring new Epiroc equipment. We will start to get that arriving on site within the next couple of weeks and through Q1 2027, and that will allow us to move more tonnes more efficiently. The second is to maintain our development rates. Despite having low equipment availability now we are getting good development rates out of the gate, and the key will be to keep that up and to allowing for early stope development.
The last step and the most important step to get us to the full run rate is moving to a dry stack or filter tailings. This creates capacity and enhances our safety and environment and allows us to have more operational flexibility as we advance that increase to production. That will be done. We will begin installation in Q1, and we will be fully commissioned in H1 2027, and that is what allows us to get to our full commercial production rates and generate that increase in production. In terms of organic growth opportunities at La Negra, we think there is a few key steps here that we can capitalize on to increase production. The first is to optimize the mine plan, and as mentioned, we acquired this project back in May, so we moved pretty quickly to put a PEA in place.
That meant not having the time to go in and do some of the technical work to optimize the mine plan. When you see that high grade starting in 2030, we think there is an opportunity there with some additional surveys and some drilling work to pull some of those high-grade zones forward, and that could allow us to be into higher grade as early as 2028. The other opportunity would be to investigate paste backfill to increase our resource conversion in some of the historic stoping areas. The second opportunity is to target high-grade silver, and you can see the strength of what that could do for the mine plan later in the years. But with exploration, it is going out there utilizing Jesus's experience to both target high-grade zones and then to target expansion opportunities through exploration as the third organic growth opportunity in front of us.
Moving on to Cusi. As mentioned, this is a real rare true silver deposit with 90% of its revenue coming from silver. It is in Chihuahua, which is a mining-rich area along the Sierra Madre belt, and you would be familiar with many of the successful silver deposits in this area. It is only about 120 km west of Chihuahua City. Very easy to access. It has got great access to mining services, contractors, and that is who is driving our restart for us now is to local contracts out of Chihuahua. We have a 1,200 tonne per day mill that is a 40-km drive from the mine, and everything is permitted and on track for that late 2026 restart, with 60% construction completion back from our August update. That has advanced since then. As mentioned, silver-dominant production.
What we get out of the gate here is a production profile that's more in the range of 2.5 million ounces over the life of the mine. At AISC, that's around $27 per ounce, and that's over a similar nine-year mine life as well. Again, low capital investment required here, about $20 million after revenue, and we have a very quick payback of 0.9 years. This was done at a base case metal prices of average of about $45 silver, and is very leveraged to the silver price given that exposure. In terms of where we are on Cusi, as mentioned back in August, we were about 68% complete. We've been advancing that very rapidly. We've just done dry commissioning of the plant and are underground at both the Promontorio and San Miguel zones.
We are on track to declare commercial production exiting H1 2027 at that full 1,200 tonne per day rate and generating our first concentrate later this quarter. On the exploration side, we think we've got a lot of great opportunities in front of us. The opportunities at La Negra, as mentioned, are around targeting high-grade silver and doing more work to determine if we do have a CRD system there. We think we have the right framework in place for that. At Cusi, we think we have some great opportunities, particularly at San Miguel and San Juan, to increase resources there. We just had some pretty exciting drill results out this morning at Cusi. At La Negra, as mentioned, we've seen very little true exploration at this project over the last two decades.
The opportunity here is to continue to target the property at a larger scale basis. We're currently undertaking a 15,000-m drill program that's both surface and underground, and it's designed to extend mineralization on some of these high-priority targets. The second stage is to step back and to do real property-scale work. This project, despite having a long history, has not seen any modern geophysics. The idea would be to carry out a number of surveys to identify intrusive bodies and/or sulfide deposits to advance that concept of a potential CRD system here. Then it's leveraging historic data, 50 years plus of data here, both from production and exploration. There's an extensive database that when we consider that with modern exploration results, could be critical in our exploration targeting.
At Cusi, we're undertaking a 30,000-m drill program now, and as mentioned, we had some exciting results this morning from that program. We're about 2/3 through that program. We have, as you can see here, a pretty extensive land package with more than 37 km of mapped veins on the property to date. We are focused on infill near mine resource expansion and then exploration drilling with an MRE, a mineral resource update, planned for the first half of 2027. Regionally, again, this project has seen very little work outside of the main target areas and the main zones that will be the source of the operational plan. Only about 10% of the land package has seen mining and detailed exploration activity. Again, we'll be leveraging Jesus's extensive knowledge of these types of systems to consider some regional exploration opportunities.
For us, the big game changer at Cusi has been the addition of San Miguel. Historically, this asset was operated by Sierra Metals and was shut down in 2023. When we acquired it, we also were able to piece together these in-set claims at San Miguel. That has been a big driver of the economic opportunity. We think that that zone can grow as well as San Juan up to the north. We will first be starting with targeting within the planned mine footprint, and that has been the bulk of the results we have seen from 2026 drilling. What we have been able to prove there so far is that we have high-grade continuity within the planned mine footprints, but in addition, we also have new areas that we can add within that existing planned footprint that could provide easy additional ounces early on in the mine life.
Then at San Miguel is to target expansion of these wide higher grade zones. We think that this is one of the highest potential targets for growth. Since acquiring that claim, we took it from no ounces to 27 million ounces total resource, and we are continuing to do ongoing resource expansion and discovery-focused drilling there. Beyond that, it is targeting brownfields and greenfields potential with San Juan and San Miguel, as I mentioned, and then continuing to do some property-wide work. We are pretty excited about the opportunity of what we can identify there. This is just some additional detail on San Miguel, which we will hopefully see some additional resource growth over the next resource update that we have early or in H1 2027. In terms of near-term catalysts, as mentioned, we are well on track to deliver concentrates at Cusi.
That drill program is underway, and as I mentioned, we are now more than 2/3 complete, and we are on track for that resource update in the first half of 2027. At La Negra, the big catalysts are going to be the arrival of the mining fleet, the dry stack tailings project, and the drilling, in addition to some of this optimization work that we will be undertaking over the next couple of quarters to see if we can move some of that high grade forward in the mine plan. That concludes the formal part of the presentation, and we are always happy to hear from investors, so there is some contact info there to reach out. I will move on to the Q&A component.
The first question is, "Beyond the silver price, what is your biggest company-specific upside driver?" I think what I mentioned around the La Negra opportunity in terms of moving some of this high grade forward, that could have a really interesting impact on our cash flow over the next couple of years. Certainly at Cusi, where we have had the success early in the mine plan years through our infill drilling, that offers a near-term opportunity on the cash flow side as well to have some upside. Beyond that, the exploration work we are doing, I think, at both properties as I walk through, these properties have a long history, but there has certainly been a lack of exploration done outside of the main zones and looking at the opportunity and bringing the eyes of someone like Jesus onto these projects.
We think there's a lot left to discover and a lot of mine life left to extend at these properties. The next question is: what stood out most to you in the La Negra economic study? I think interestingly, when we acquired La Negra, we were of the view that we could be doing something in the range of 2.5 million ounces. The opportunity to push production up to 4 million ounces a year on average, that was a really exciting opportunity for us as we got in and took a fresh look at the resource and identified some of these opportunities. I think when we step back and look at it, we've been quite conservative in how we've planned the mine plan here.
By pushing some of that higher grade La Negra out to 2030 to allow us time to do that technical work, we wanted to make sure that we could deliver on our 2027 numbers. It's not often that you're putting out a PEA on a producing asset. That's just a function of the timing of how this worked and because it was a private asset that we acquired. So there is a really unique opportunity for us there to bring some of that forward, and I think that was a really welcome surprise for us in that work. Cusi first concentrate is still Q4. Are you still on budget and schedule? What's left before the switch flips?
Yes, still on budget and schedule, and I think, an important point of the discussion for Silverco is, because our capital investments in both projects are in the range of $20 million, if we do have small schedule or budget overruns, we're talking weeks and millions of dollars, not hundreds of millions of dollars as you might see in some of these development projects. So, we are on schedule for both of these, as I mentioned. In terms of the main catalyst that we need to deliver, we have advanced the mill restart quite considerably, and for us, it's really just about getting the production or the development rates going at both of those zones to put us in a position that we can ramp up production through the first half of 2027, and that work has been progressing very well.
Like I mentioned, we're underground at both Promontorio and San Miguel, so it's really just about continuing to keep that development going. The next question is: are there investments that could improve both efficiency and environmental performance? I think the main process or project that we're investing in now that I think will achieve both of those things is the dry stack tailings project at La Negra. Overall, moving to a dry stack is certainly from a safety perspective and an environmental perspective, a preferred choice, and it certainly from a production standpoint will allow us to increase that throughput, as I mentioned, up to the full rate of 2,500 tonnes per day. The next question is: with $53.6 million in La Negra cash flow, is Cusi fully funded with no new equity needed? Our intention is to keep our share structure where it is.
We will be looking to replace an existing debt facility that we acquired with La Negra. You will likely see us pursue some opportunities to put an improved and potentially larger debt facility in place over time here. I think that's natural as we think about producing companies to have some flexibility as we grow the company and as we put these projects into production. But the intention is certainly to focus on other opportunities for funding rather than equity at this stage. The next question is: beyond Promontorio at Cusi, which target has you most excited? I think it depends if you ask the geologist or the mining engineer.
But I think, what we've seen out of San Miguel out of the gate, the opportunity to add ounces and to get into some of these wider high-grade zones, that really offers the opportunity to build resources and it also offers the opportunity on when we think about operationally, where can we build tonnage rates. San Miguel has a lot of promising elements to it and so we'll continue to target opportunities there. San Juan to the north, the opportunity there is to be sort of a similar zone to what we've been seeing at San Miguel, but we need to do some more work there. The next question is: how quickly could the new mining fleet make a difference?
I think we'll start to see tonnes be moved pretty quickly with the new equipment, but obviously we want to make sure that the team down there is trained and has the support and resources that they need to execute on that. So, that will be into H1 2027 and that big step change. Where we will see the big difference is on the installation of the dry stack tailings and our ability to put more tonnes through the mill, but we expect to see the daily rates and the weekly mining rates moving up as we get the full equipment fleet, and that will be in place by the end of Q1 2027. The next question is: Silverco brought together some strong silver sector experience. Where does that give you an edge over peers?
I think, like I mentioned at the outset of this presentation, we've all been very impressed together as to sort of who we've been able to attract to the company, and there's a lot of excitement around how we can build and grow this company. I think, just a combined expertise and also networks within, not only Mexico but within the global silver sector, I think that's a great opportunity. And having the experience of going through these various phases of exploration development operations ramp-up, I think we have that full slate here. And that looks like to be the end of my time. So apologies if I couldn't get to your questions. Happy to reach out after or please feel free to reach out. We always love connecting with investors and talking about this stuff. Appreciate everyone's effort here and time to commit to the presentation.
Thank you.