Kuya Silver Market Update

0:04 Good morning, good afternoon, or good evening I suppose for some people as I think there are quite a few time zones represented today. Thank you for joining us on short notice for a market update from Kuya Silver. I've got here right now David Stein, President, CEO and Director of KUYA. We may be joined in the near future by Krishna Amaya, the COO and Sheila McGowan, the CFO, while David is running through a presentation. Here's how today's gonna work, just for the folks in the room. David is gonna go through a brief presentation. Following that, there's some analysts on the call who are going to ask some brief questions. And if there are any questions from the live audience for you to take those, there's a chat button at the bottom of the screen. You can ask questions at any time. We'll try to get to as many as we can. We're aiming for a relatively short event today. So please do try to get your questions in early. I'll be more likely to seek them in. If for whatever reason I don't get your question, I'll make sure that the Clio team gets them afterwards and they'll be able to get back to you.

0:57 The only other thing I'll say is this event is being recorded, will be available for replay. You'll probably get it in the mid-morning Eastern time. That replay will be done. We'll come in at the same URL that you've got here, but it will also be on Six's YouTube channel. That's enough out of me. David, I'll let you get started with a presentation. OK, thanks, Romeo. And I think there's also the request meeting button too that you can press and then we'll, we'll, Kouya will follow up with you after. But let me share my screen.

1:35 Yeah. No, that didn't work, did it? All right. Oh, no, that is working. Okay. I need to do this. Okay, all right. So thanks everyone who on the call, we're gonna focus on our first quarter outlook And again, really leave lots of time for questions. We reported our Q1 after the close yesterday. And highlights include our highest ever revenue by a significant margin at almost 1.5 million US dollars.

2:24 The net loss was relatively low and very, very important, of course, when you're starting up a mine is the cash position. We've got a very, very healthy cash position. Still sitting at 27 million and we're, you know, still pretty close to that here, you know, more than halfway through Q2. You know, one thing I want to emphasize on the financial summary here is just you can see the revenue and the production costs being almost the same. So basically, excluding some of the mine development costs, we're breaking even almost at the mine in Q1. And that was given relatively low production levels, especially in January and February.

3:14 Of course, things did jump up in March and they've continued to improve in Q2. So that is, I think, really, really strong position for us financially. And we're very pleased that that's strong footing now to continue the mine development here in Q2, Q3 and Q4 of this year. So we put out a production target for the year in this range of 150 to 200,000 ounces equivalent. Of course, that's, You know, we produce mostly silver, so there's not a huge difference between equivalent and silver.

3:53 And you know, in terms of the things I just want to emphasize for the, you know, for the the Q1 results in the outlook is, you know, obviously the strong revenue is, you know, it puts us in a really unique position as we are able to, you know, essentially offset costs that we're incurring at the mine. We are now, you know, we're continuing to increase operations, as we've mentioned. We now are onboarding contractors to further help with development of the mine and as well exploration. So that's gonna help to augment our staff at site and make us even more productive and get more done. So that's a new thing for us that's very exciting.

4:43 And you know, we're still driving towards that 350 ton per day plan by the end of this year. The exploration and resource side, we didn't, you know, there's not much news here in Q1, but I will tell you that we are, drilling is underway in our 20,000 meter program, which will be largely weighted towards the second half of the year. And, you know, again, emphasizing here that the exploration that we're doing is really supporting our future production, Not because we're necessarily just doing infill drilling, although we will do some of that of course, but the drilling targets that we are hitting are things that we can put into production very quickly, maybe not the same year, but within a year or 2.

5:39 And that gives us, again, a lot of leverage on in terms of the dollars we're spending on exploration. It drives a lot of value compared to, you know, just doing sort of pure exploration for development purposes. So we are looking at capital expenditures increasing, both due to exploration, mine development costs, and we are still working on the Camilla plant acquisition, so I've got a bullet point there as well. And diligence is ongoing and we have been using the plant in the meantime operating normally, So there's really been no issue in terms of our processing, just where we don't own the plant yet.

6:25 So that due diligence is ongoing.

6:30 And If all goes well, we should be able to wrap that up pretty soon. We're maintaining our financial discipline. I think the revenue generation that we're getting here in this year is very important to that and really taking advantage of the $75 plus dollar silver price. We're advancing the exploration aggressively now which is a huge huge driver for value for all mining companies including us. And especially at our size the exploration gives us a lot of extra leverage as compared to a bigger producer.

7:05 And, you know, that's that's really, you know, setting us up, I think, for, you know, strong results in development news this year in 20 26 and then, you know, some significant cash flow generation beginning next year and beyond as we continue to grow the mine. All right, I added this kind of slide just to make the point that the mining experience that we're developing is really, you know, it's really an intangible value that the most junior companies do not have. There's a small handful of companies like Kuya out there, but the vast majority of our peers by market cap are developing projects

7:52 that they really have no intention of putting into production or it will be done by someone else or it will just never go into production. And so the path that we've chosen with Bethania is a little bit different, but we feel it's been a big success and a big driver for us to differentiate Kuya and to create value for shareholders. So, you know, number 1, the revenue generated from the silver sales that is ongoing and is really starting to pick up this year. It's offsetting the mine development costs and eventually we'll pay for them completely. As we as we get towards steady state, the The staff that we've built up at site and the production infrastructure is difficult to replicate. You know, and I would say if you had to start all over again it would take another company 1 to 2 years at least to get to where we are.

8:49 And to go any faster than that, you're probably looking at, again, overpaying people and and cutting corners, which we have not had to do. The time value of permits, the fact that we have our permits, you know, just saves a huge amount of time that most other companies do not have that benefit. And then the other advantage to being in production is that if you need new permits, like for an expansion, you can be in production and make money the entire time when you're working with the government officials and your community on those permits, you're still producing, you're still making money. So we're in that strong position.

9:25 The exploration success that we have, that we are expecting from the drill program, It's much more valuable because on a net present value basis, we're able to put those ounces into production much sooner because we have an operating mine, and basically where

9:42 all of the exploration we're doing is within 4 kilometers trucking distance of the Bethania mine. So everything that we're finding could be, you know, a source of production in the next few years. And then, you know, longer term, we can leverage the Kuya team for, and the operations that we've already built in Peru for lower cost and lower risk growth. That could be acquisitions, that could be expansions, that could be anything. But the fact that we have a team and we continue to build a strong team there, again, gives us a big advantage that most sort of exploration development companies don't have and never will have.

10:19 So key takeaways from the Q1 is the strong performance as we continue to ramp up the operation. I think when you're an investor you want to make sure the company is just not burning through a lot of cash and clearly our results show that we We burn through all burned almost no cash in q1

10:39 We still have that strong cash position of 27 plus million US dollars We continue our operational progress towards that phase 1 target. We are continuing to increase the mining and processing and underground development, as we said we would. And the 20,000 meter drill program, which is a relatively new thing, we announced, I think, in late March, and that is on the way and will continue to increase as we go through the year. So we're building operational scale to unlock the Bethany silver mine. We think it's going to be a huge silver mine in the next few years

11:17 And we're just getting started. So with that, I'll open it up to questions. Thanks, David. I think a plan was initially to bring on Barry first. Barry, if you want to come off the stage. Oh, Brian, pardon. You can go ahead and ask the first question to David.

11:41 Hi, guys. I guess and Gallo because I see Sheila's on as well. So this is the first time you've put in, I mean, I guess in the presentation, the silver equivalent production of 150,000 to 200,000.

11:56 And if I just take the midpoint of that and use $7 silver, I get around $12 million of revenue. So I guess from my perspective, it implies further that I'll say the ramping process, the tons per day, getting more high grade silver is probably developing slower than what I had modeled. And I'm gonna come back to that question. I'm gonna first tell you, please, and I think from my perspective and a lot of investors, you're always looking for that return quicker rather than later. But to me, it's more obvious that this is, 2027

12:35 is a time that we really start to see significant cashflow and get enthused about the investment and we're still kind of laying the groundwork. So I guess I'm gonna ask you to comment on that, but maybe as you do, I'd also like you to hit on whether there were any specific impediments that you've run into along the way. Is it taking you longer to hire your contractor for the ramp? Are you still struggling with getting enough of miners hired? Are there any specific things that you can point to or would you

13:07 say more just kind of, no, this is the nature of kind of a startup operation such as this?

13:15 Very good question, Brian. And look, I think to be honest, it's all of that. I think the fact that the mining industry is so busy and bullish right now just means that everything that we, you know, if we go back a year, everything that we would have expected is just taking a little bit longer. So that includes hiring contractors, that includes hiring staff, that includes, you know, like you name it, right? So you know, it's one of those things that,

13:48 you know, if silver was $20, we would be able to hire whoever we want and everything would be, from that point of view, a lot easier. We probably wouldn't have the market cap or the $27 million in cash

14:03 that we're sitting on now. So you know it's it's I guess pick your pick your poison but we're very happy with sorry there's some background noise there.

14:21 We're very happy with how how things are going. And obviously we're learning a lot as we go through this. And I think things should continue to pick up the pace as we go through the year.

14:35 You are going to get to the part about how we should be enthused about 27. Yeah, look, I mean, I think we we have a strong target to exit the year and then and then that implies that we should be making, you know, producing a significant amount of silver in 27. We'll we'll you know, we'll kind of update the forward looking stuff later in the year. I think it's too early.

15:02 But you know, if you go back to our 100-100 plan, we always plan to be, you know, we plan to be running at more or less steady state in 2027 while we build the second plant. And that's, again, we're not really talking too much about that yet, but that's something we are still looking at doing next year with cash flow with our own cash flow. So that's why I think 2027, you know, is

15:39 is is a. To 700 in 2028,350 in 27 to 700 in 2028. If you look at an ounces, you know, depending on exactly what grades we can end up mining at those rates. We're looking at somewhere between you know upwards of 1 to 1 and a half million next year and then 2 to 3 million in 2028.

16:07 Very good. So your press release speaks about, you know, how you've got excellent contractor partners, are there significant contractors beyond just those that are helping you on the ramp and beyond the exploration that are noteworthy or those the 2 major contracting sources? The other one we're bringing in contractors to do

16:31 specific underground development jobs for us as well. So that'll free up some of our staff labor to focus more on production

16:43 and essentially just give us more manpower underground. But we are expecting to do that as well. So really, there's sort of 3 different contracting jobs that will be onboarded here starting now and then in the next couple of months. You mentioned 2 of them, and then that would be the third.

17:06 Okay, and last question for me. On the Camilla acquisition, do you feel fairly confident that that would close within 2 months at this point?

17:19 Yeah, look, if everything continues to go well with the due diligence, then there's no reason why it wouldn't close by then, if not sooner, significantly sooner. I think, again, we kind of, looking back now,

17:37 this is the second biggest acquisition we've ever done. The biggest was the Bethania mine itself. And the Bethania mine itself, when we look back, you know, that we did when we were doing the merger to go public, we did

17:54 probably 4 months of due diligence. And that was an asset that we already were working with for 3 years before that we knew very well. So, you know, I think this is, although we'd like to have closed it sooner, this is not within the realm of, you know, it's sort of within the realm of when you would potentially close something like this, given our experience in Peru.

18:23 Okay, very good. That's it for me. Thank you. Great, Thanks so much, Brian. I think we'll bring on Mark Reckman now for a quick question from Noble Capital Markets. Also, as a reminder, that Shailen Christian, you guys can throw on your camera, Mike, if you'd like to help answer questions. Mark, I'll leave it to you. Oh, thank you. I've got several questions here. Just to follow up on Brian's question, under the current agreement with the owner of the Camilla plant, is there available capacity

18:53 to accommodate your planned ramp up in production?

18:57 I guess maybe ask another way, if you're not able to take complete ownership of the plant or you had to pivot to a plan B, would that affect the planned ramp to 350?

19:11 So, you know, the Camilla team owners, the current owners have a plan to expand the Camilla plant already and they were in the process of you know, starting to look at doing that and are We believe that if we don't buy it, they will do that expansion anyway, so So it we may be able to just continue to use Camilla regardless.

19:37 However, there are several other plants in the region and we know them very well. We've done a lot of corporate development to build those relationships over the last few years. And so we do have other options if required.

19:52 Now, Bethania is targeting the 150,000 to 200,000 silver equivalent ounces in 2026. Would any delay in development of the new ramp to unlock those higher grade zones, would that affect your expectations in any way?

20:08 How important is that ramp? It's pretty important, isn't it? It definitely gets us some extra ounces in those final few months of the year. So it's important, but it's not, I mean, I think we can get there, towards the lower end of that, if at least close, very close to it, if not beyond the lower end of that without the ramp, or if the ramp gets delayed by a month or 2, we could still get pretty close to that level. Now the company noted that grades may fluctuate in the near term due to the ongoing development work.

20:45 Could you just maybe elaborate on the expected grade variability and when more stable mining conditions are anticipated or those grades to become a little more predictable? Well, I think if you kind of run the numbers on the target forecast we put out, back calculate the grade, you'll see that the grade estimate's pretty conservative. So, but they should stabilize as we get more production. So it's really, the more times you can do per day, the more,

21:22 the flatter the line should be in terms of the grade, because you're able to, you know, sort of blend in from different stopes. And, you know, the production should trend towards more of the average that we would expect, the average resource grade. Now, you ended the quarter with a very strong cash position of 27.2 million. So how are you prioritizing the capital allocation between the underground development, the exploration, the, any, I guess, acquisitions or purchases of equipment,

21:52 and also just maintaining the balance sheet flexibility? I mean, how much cash would you want to keep on the balance sheet? Well, you know, I honestly think we can do all of the above, Mark, with the current cash position. You know, the biggest item we're looking at is would be the Camilla plant acquisition. Biggest item by quite a margin.

22:17 The exploration, you know, will be another big item, but it'll be spread out over quite a number of months over the rest of this year. And similar with the mine development. And I would throw the ramp in there and the rest of the mine development. So, you know, I think we would ideally, you know, look to end the year with still, you know, a pretty strong balance sheet and then be in the position that now we're actually adding cash to the balance sheet. So that's really probably the best I can say at the moment. And then just last question. So the exploration program has both underground and surface drilling initiatives. I was just kind of curious, you know, which exploration targets do you think currently offer the greatest potential to expand the resources or even extend the mine life at Bethania?

23:11 I think the lowest of the low-hanging fruit, I always say, is the deep extension of Bethania, you know, because we know the veins are there, we know they, you know, they're vertical, they're sub-vertical, so, and we don't, we're not aware of any structures or any other reason why they would stop at depth. So we think there's a lot of upside just to go another 1 to 200 meters deeper there. And you know that would essentially double the entire size of the current mine area versus what's been mined historically. So that's that's to me that's that's the that's the biggest one. It's also because it's close to our existing infrastructure. It's also those ounces are the most valuable because they'll come into the model, you know, the net present value, time value of money decays over time, as you know, as an analyst. So those ounces will be the most valuable for us.

24:08 Even though it's exciting to make a new discovery and we're very excited about Miococca and Carmelitis and some of these other Tito, they all look really exciting and we expect to be successful there as well. But I still think the deep extension of Bethania is the lowest risk and the easiest target to build ounces quickly. And then I would say the next one is probably the eastern extension of Bethania, the hilltop zone and the east extension underground. Well, that's very helpful. Thank you so much, David. No, my pleasure. Awesome. Thank you very much, Mark Regman from Noble Capital. I will remind people as I think a number came in late, there is a request meeting button at the bottom of the screen. If you roll your mouse over it, you can request a meeting with the CREA team at any point during today's call. As we've gotten through the analyst questions, there are some questions in the chat.

24:59 Just a reminder, Christian and Sheila, you're welcome to chime in. Your unmute button at any time as we go through these questions. The first question we got in right towards the beginning of the hour, David was from Barry Hall, who asks, when will we get 27 guidance? We'd love to do that in Q4 of this year. You know, I think if just, if you look at other mining companies, I think that would be, that's sort of the best practice that, and we would aim to follow that as we join the ranks of the other mining companies. Great, makes sense. Christian from the chat who thanks you very much for doing regular meetings, he's got 2 questions so I'll ask them one at a time. He wants to know what exactly are the open items for the due diligence that the transaction has not gone through yet?

25:47 It's been like sort of legal permitting related stuff. We've had to do more heavy lifting on the searches and stuff than, you know, than you might if everything was like on a cloud already. Right? Yeah, sure. So, honestly, that's it. And again, as I said earlier in the call, if everything goes well, we should be able to close pretty soon. What's the second question? I want to know the ramp that's planned in the mine is it already permitted? Yeah, there's no special permits required for that. We followed our mine plan at the end of every year so and the ramp is already part of that.

26:35 Great, perfect. One question, are you self-funded or good in the treasury is how they put it, through the ramp up from this period on? Yeah, we believe we are. And we have some flexibility over and above, you know, sort of the minimum levels there. Awesome. Brian from the chat asks, why are production costs increasing at the same rate as revenue? And when do you anticipate revenue to diverge from costs? Well, look, I think if you look at Q4 production costs, they were a lot, it was a lot more than our revenue. So I think on a unit basis, they are going down already in Q1 and they'll continue to go down. You know, when you're starting up a mine, there's a lot of your costs are fixed costs.

27:21 So basically, they're costs that you're going to pay regardless of how many tons you mine. And then there's a proportion of that, that's the variable costs that, you know, is like, you know, labor and fuel and equipment. And so the stuff that is the varies with every time that you produce. So the more times you produce, essentially, the fixed cost stays more or less the same. And the variable cost keeps will increase. But because the fixed cost isn't growing, essentially your unit costs start going down. And that's the same if you're making widgets or you're mining in Peru. So that's really what's happening right now. And I think what we're showing is really very normal sort of ramp up financial results.

28:10 Great. Sergio from the chat asked, can you update the tons per day value achieved during April? And how is May going so far? No, all I can say is that we I mean, we did we did say we started the quarter at 100 tons per day. And we we have, you know, we do We are still in the position where some days we're doing extraordinary development, where the tons might go down a bit. But overall, we're still moving in the right direction. And I think Q2 will be significantly higher than Q1 was in terms of the tons per day. Awesome. And I'll give folks, just kind of some people joined late, one last chance to ask questions. By asking you, David, what you're most excited about for the rest of the, or for next quarter actually?

29:05 Look, I think for Q3, we, well, I mean, we're in the middle of Q2 right now, so we'll report our Q2 in August. And in terms of what I see for Q2 I think again we'll show some progress on the mining side and you know I think by the time we have that call in August there should be more you know we may have some exploration results I would hope we will from the underground drilling and, you know, a lot more to say about the mine development, the contractors we're onboarding, the ramp development. I think there'll be just a lot more news, there'll be a lot more things to say about the ramp up in the next 3 months, which I'm excited about all those things.

30:00 In a way, we don't want to have, we don't want to be coming to the market, you know, in 3 months from now with a 27 million cash in the balance sheet, because it means we're not allocating that capital. And now we're at the point where it's great that we raised lots of money and that we're in a strong financial position, but now we need to be investing it back in the mine. So that's really what I'm excited about. Awesome. One last question that snuck in from Wesley. Just looking for the status of the Middle East project that's in KU's portfolio. Yeah, I thank you for asking that because I wanted to put a bullet in my little 5 slide presentation and I forgot. But let me update the 2 other projects, both of them. So Saudi Arabia, we are drilling right now. Our partner approved another drill program.

30:51 So we are drilling in that same area where we had all the success last year. And we're very excited about it geologically. It's looking like a very strong project. And so stay tuned. We'll have an update on that in the next few months as we get those assays back from that to the current Joel program. So that's looking good and remember we're not you know it's fully funded by our partner and so it's it's a great call option for Kuya because if it's successful it could be very valuable to us and you're not paying anything for it you know in terms of the share price today. The other very similar story is Silver Kings. We are doing some work there, but minimal in terms of the cost We've got a very interesting and innovative lab testing program going on To look at recovering silver and cobalt and potentially other metals from the above ground stockpiles, including tailings in particular, the tailings actually, because that's the easiest stuff that we can that we have that you can estimate, you know, to estimate the grade and the and the excuse me, the tonnage of it because it's very homogeneous.

32:07 So stay tuned for that as well again I think you're not paying for any value of in the Silver Kings project you're not paying for any value in Umm Hadid. And if we're able to unlock some value there and show the market that those projects are worth something, which we believe they are, then that's a free upside for you as a shareholder. So I think it puts your shareholders, besides Bethania, which alone is a company maker and a huge, huge opportunity for us, but it's nice to have those little extras as well to add further value as we go through, you know, this year and beyond. Awesome. David, thank you so much. Shayla Christian, thank you for joining us as well.

32:54 Mark and Brian, thanks for throwing in questions and thanks to our audience. I know a lot of you came pretty much last minute notice. So appreciate the kind of packed house and all the questions for today. One last reminder, you can hit that request meeting button at the bottom of the screen to try and get a meeting with the Kuya team. I'll make sure to connect you after the event. And if you think of the perfect question to ask as soon as the event ends, as I often do, please do feel free to throw that in as well. I'll make sure that the Kuya team gets it. But everyone, thanks for joining us so early this morning and hope you have a great end to your Wednesday.