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Andean Precious Metals

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September 16, 2024 at 11:40 AM (MDT)|Broadmoor Hotel & Resort

Alberto Morales

Founder, Executive Chairman & CEO

Mr. Morales is founder of Andean Precious Metals and has over 30 years of experience specializing in corporate finance, mergers and acquisitions and corporate restructurings. He has participated individually in other private equity and venture capital projects as co-developer, investor and/or advisor in various sectors, including mining, alternative energy, telecommunications, aviation, tourism, financial services and asset management. Additionally, he has participated in the planning, formation, development and consolidating stages of various start-up business ventures. He holds a Bachelor of Law from the University of Monterrey and a Master of Compared Law from the New York University School of Law, and was admitted to practice law in Mexico in 1985 and in the State of New York in 1989.

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Well, good morning everyone and thank you for joining. Before we get started, I just wanna make some reference to the legal disclaimers and forward looking statements as we will be making here. So last year, when we were here at the same conference in September of 23 I was asked by the audience and by the moderator, what was the game plan that Andean had with so much cash that it had filtered in its balance sheet. And I basically said that I was cautiously optimistic that we're going to pursue an acquisition before year end. Well, one year later, I'd like to say that we fulfilled on that promise and we believe we have even exceeded in the way we fulfill that promise. So where were we as of Q two? This is the disclosures of public information. As of June of 2023 we were a single asset company with a single product. We were located in high risk jurisdiction Bolivia with a total production of roughly give or take 5 million ounces per year we had in or in a half of the year up to June of 23 total revenues of 38 million every dow of 3.7 life of mind, roughly about two years net catch possession of about 70.4 million. Not net debt, not even applicable because we had zero debt employees roughly about 250 an M and I resource of 5.9 million ounces of silver. And our stock price was 67 cents. Where are we today? We are now a multi asset, multi product company. We have two assets, a gold mine in California, Karen County and our, and we're still keeping our flagship silver asset in Bolivia. We are now in two jurisdiction. One of which is a first tier jurisdiction, reducing the overall company risk in connection with the Bolivian risk. Our total production of 11 million ounces of equivalent silver ounces is the estimation of the total silver production equivalent for this year. By half of the first half of the year, our 2024 revenues were 100 and 13 million. Our Evita had jumped to 24.5 million and our life of mine of our combined assets are six years net cash possession of 87 million negative debt. And this is because we inherited a COVID loan from our predecessor when we did the Golden Queen acquisition, but still our cash position is way higher than the debt. That's why we have negative net debt employees give or take 500 some a little bit more. Our M and I and two P resources are now 822,000 gold ounces and roughly 30.2 million silver ounces. And our stock price as of September fif as of September 15 was 108. Today we hit in another 52 week high. So we believe that we have exceeded on that promise. We be, we have made a significant transformational growth with the fine Andean story as pursuing transformational growth. And from here on our next challenge is to even double our size again with and trying to pre dilute the shareholders at least as possible. And why am I saying that because we accomplish all of this, not only did we not dilute dilute the shareholders, but we even were able to buy back roughly about 7% of our stock and now, which is very accretive in value to our shareholders. And now we still have more cash than we had before the acquisition. I have personally tried to do my homework and basically, I have not found a single company that in the last five years, it has been able to grow the way we did without diluting the shareholders, without incurring in positive debt, reducing the outstanding shares of stock. And we're intending to go for more for this year. Where are we now? We're now a two asset producer in two different jurisdictions. California and Bolivia. Our headquarters are based in Monterey, Mexico and roughly, we're north of 550 employees. This is a graph that shows our increase on, on, on reserves and res and, and reserves in M and Mrnre basically including both 2 p.m. and I and inferred, you can see now how we have grown significantly as we have expressed same thing in connection with the expected production. As you will see from this graph. What it's intending to show is that we're roughly 5050 between gold and silver while silver is more volatile and it's a spot prices, gold is more steady. So we're getting the benefit of having a more steady gold prices. We've been able to ride this gold prices. We now the gold to silver ratio is still close to the I haven't seen it but last March, it was still about 8788 to 1. So which is pretty high. So summarizing this portion of where we were and where we're headed, we still believe that our story is still of pursuing transformational growth because we have been showing a very positive performance of our assets in their production, their cash generation. We're focusing on driving the cash and the profitability with, with our now, with our two producing assets, we have a very strong liquidity and balance sheet which literally allows us to continue looking for acquisition targets and continue to grow un organically, meaning by through acquisitions. Now, in the, in the case of organic growth, we also are using our balance sheet to optimize mining plan, improve our controls, grow aggregates and which we will talk about in a minute. And we also have secured long term contracts on our Bolivian asset, which we will talk about how we have changed the business model in Bolivia from being a traditional mi oxide mining facility towards an ore processing facility. And M and A still our main line of growth by means of which we could grow on a transformational basis. So having, having said that we're basically gonna get into our two assets now, Golden Queen, it's located in Kern County California fully permitted hip L facility. It's based on the Mrnre that we recently did after the acquisition, it shows that our two P and MN I resources at 822,000 ounces we still have in four ounces and roughly we had 5 to 6 years. Now we are increasing the exploration budget in Golden Queen because we believe we can even extend this life of mine further. We're optimistic and hoping to be able to deliver to the market results either on Q three this year or Q, I'm sorry, Q four of this year before year end or in Q one of next year, what we found after the acquisition that we have some low hanging fruits in the case of mine savings and mining cost, mine optimization, plant optimization and as well as better procurement of our outsourcing contracts in order to increase our efficiencies in the plant. So we're working on that to try to get more efficient facility exploration potentials. We have, we have three veins that we're going to concentrate the our exploration targets. In order to increase the life of mine. It's the silver queen vein, the alpha zone and the sheeted vein. So we're moving forward into increasing those exploration projects for value creation in this asset, we're going to be spending money on exploration. As I said, mine, optimization or control and operational efficiencies and but this facility is also permitted for the sale of aggregates, meaning that our waste we have basically a waste ratio has been, has been permitted to be able to sell aggregates to the market, meaning that having the Southern California access beginning from L A and all the way down, it's a huge market. So we're now on the laboratory testing of the alkalinity and the chemical compositions of our aggregates to start creating a business model for having an additional line of business. We could even expand pay on the life of mine of the gold mine. This could be, we are cautiously believing that this could be quite profitable. Now, going back to our flagship assets San Bartolome Facility in Bolivia, as you can see from the map, it's located in the city of Potosi Bolivia's Endowment and on a geological ba basis is humongous. As we said last year, by end of June of last year, we had roughly about 5.9. We have not been able to update our Mrnre. We have now done so in connection with other contracts that we had pursued. But most importantly, we have now commissioned our tailings facility. We're reprocessing our fines deposit facility and that's how we got into the new Mrnre with roughly those 30 million ounces of silver. When you combine two piece together with M and I San Bartolome, it's been in operation since my predecessor. They commissioned the facility in late 2008, early 2009 and has been steadily producing give or take an average of 5 million ounces a year. Our estimate for this year and our guidance has been the same roughly 5 million ounces, the fine disposal facility project, we announced it last year because we were exhausting the reserves that my predecessor left. It was the alluvial portion of the Cerro Rico. Those were oxide facilities that had really, really very low grade. So we stopped mining them in conjunction with the, with the negotiation with the, with the authorities to preserve the Cerro Rico. And we stopped mining the last portion because we were this, this were reserves at about 20 g of silver per ton. It was being too costly to process. Now, we're having a better grade average in our Tailings Dam, which is, as it says that it can average about 58 g per ton. And at these prices, we commissioned the FDF plant. It's a hydraulic pumping where we will be processing the tailings from our own Tailings dams, which will also help us to reduce a reclamation liability. And we have and that's where a significant amount of answers can also can also come in at a much lower cost. The business model that actually drove the profitability of this facility. This is not a traditional mine per se. We bought a traditional mine per se from my predecessor, but it only had eight month life of mine when we purchased it. So what is it that we did seven years ago? And what is it that we're doing to have acquire an asset with an eight month life of mines of reserves and been operating it for almost seven years and have 4.5 more years to go. What we actually did is we changed the business model into what I call a cash spread business, meaning that we buy or from third parties and the purchase of that or variate depending on the spot prices. If the spot prices goes up, we pay more. If the spot prices are less, we pay less. So the all in sustaining cost is really not an accurate measure to actually judge the performance of San Martos. So with this year, we changed the metric to cash, gross operating margin and to cash margins. And that's what we're going for. The cash spread every, on every oil we buy. How do we plan? How do we price it? This is basically a statement from 10,000 ft above, but it's a little more complicated than that. We reviewed silver spot prices, the ore grade, the weight, the tonnage, transportation, the metallurgy of it and the recoveries that it's involved. Our exposure to the metal, roughly on spot prices that we buy a O beer facility are 60 to 75 days in case of we do an fob purchase. But now we have also pursued to buy even bigger contracts. We recently purchased 5 million tons from another junior company, Junior Canadian mine. And we're, and we're still buying 100 and 50,000 here, 100,000 there from other private individuals or even Cooper. And this is how we were able to increase our MRMNR A to the 4.6 years that I just explained. But just to be just to be clear, tho those 4.54 0.6 years that we have, they're not consumed on a linear basis because we purchase roughly between 110,000 tons a month from spot prices as to the communities and artisanal and cooperative's and in general that goes F four BR facility that basically, and that basically could reduce up to 50%. The exhaust how we exhaust all those 4.5 years, meaning that the more we buy on the spot, the more we stretch those years. So I could comfortably say that some under the same Mrnre can easily have more than 5.5 years growth in Bolivia for purposes of talking about San Bartolome. It's basically afford for pro items to be talking. We are basically applying for additional mining rights and contracts from the government for oxides. We're processing our tailing stamps. We're pursuing constantly and very selectively new purchase contracts from third parties. And also M and A at the same time in, in, in Bolivia, our social license, San Bartolome out of its operational expenses, literally re in inject into the city of Potus and the Department of Potosi in general. Give or take depending depending the flow 60 to $70 million a year. What this does is that the multiplier effect of injecting that cash into the economy and, and the many times that it circulates among the, the circular economy, it accounts for roughly 23 to 25% of the GDP of the city of Potosi. We give contracts to the communities where we or mine, where we toler mine. They, they do the trucking, they do the hauling. So that's how we keep our social license by spreading the benefits of the community into the society. And we are looking 96% of our employees are, are Bolivian in, in that case as well, our production from here to UN we're sticking to the production give or take, plus minus 5%. It's on a consolidated basis. close to a 11 million ounces of silver equivalent. Our capital structure we at Andean are very careful as to what we do and how we grow our company insiders own more than half of it. And that's really tells you that we're being very careful with the way we deploy our financial strength because we, since we have a lot of skin in the game, Eric Prods continues to hold about 14% of it institutions and retails, it's another 28%. And there's an ETF that that holds about 5% of our stock. Our company has a significant opportunity for re rate. We're now even even hitting this 52 week high in today this morning, we're still trading at 0.7 revenues, 0.1 0.7 Evita, we're still trading basically at very low multiples. We believe there is a huge potential for re rating in the price of our stock. And our vision going forward on pursuing transformational growth. We're gonna be focusing on maintaining and enhancing the production in San Bartolome, optimizing golden queen, creating additional value through various items like exploration or control covered resources. Mine optimization causing and most importantly through M and A, we will view this. the M and A activity has the possibility to transform our company into a much bigger one. And I think we have about a few minutes or a minute. We have, we have time for one question if. Well, here's a question right here. Thank you. Well, actually carry, I'm gonna ask two questions. Go ahead. Thank you, Alberto two questions for you. Sure. Fir first, how much are you planning on spending on exploration at Golden Queen? And are you planning to spend any exploration money in, in Bolivia? So that's question one, question number two is on the M and A Are there any particular ideas you have in terms of traffic diversification or, or potentially commodity diversification? Yeah, I will try to answer that somewhere on a summary of this to keep it to the, to the time. But yes, we are increasing the exploration budget in a couple of million dollars in Golden Queen as we have. Basically, we want to expand the life of mine of Golden Queen. So, so we're basically putting in a couple of million dollars from here to year end and in the case of Bolivia, we're also putting on exploration because we've been offered larger portions of some or sites where we need to explore the test, how much to see how much are we gonna pay. So we go and do all the exploration even if it's size, it's just not, you don't go that deep. You go at 25 m different spread on the drills. And this is how we measured and how we do it. And on the M and a side, we are looking primarily into North America. Why? Because we want to reduce the overall risk exposure into the, into the jurisdictional basis, but we're not close. We're also reviewing at other if the assets are worth it and if good assets, we're also looking into the Latin America section as well. OK. And maybe just, I had one question on the aggregate at Golden Queen. Have you done market studies or like, do you have a sense for what the annual margin could be from selling aggregate into the local market? When, when we put this mine, they actually make concession some of the aggregates to a small, very small local vendor of aggregates in the community. But it goes more mostly for the decoration type. They separate the rocks by colors by types and then it's, it's a little bit more of a highly priced decorative but less volume. What we're looking now, it's, we're doing the the, we're doing the lab testing, we're testing it for alkalinity. We're testing it for composition for hardness so that we could determine at which layer of the construction food chain we can sell in bulk in in hopefully in the thousands of tons per month. So and that's where the bigger margin is. We can literally move 100 200,000. There's a rail spur that goes at 3.5 kilometer, I'm sorry, 3.5 miles from our, from our facility. So it wouldn't be that expensive to kind of have a rail spur to be able to transport high volume. So we're envisioning that that would be the way to go. But we're at the embryo stages, early stages of putting together the business plan. Ok, great. Thank you. Ok, so that's the last presentation for this session. There is a lunch which I'm sure everybody's aware of. It's just back over here and there is a presentation over lunch from the World Goal Council, which people may be interested in. So if, if you're so inclined, that's also on as well. So, thanks very much Alberto and thank you for joining. Thank you Gary.


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