SCZ: Q1 Financials Beat on Major Cost Improvements
What you need to know:• SCZ reported Q1 financial results that beat our estimates due decreased costs and the increased silver price.
• Santacruz reported Q1 revenue of $70.3M (+34% YoY) vs. our estimate of $69.9M and adjusted EBITDA of $27.5M (vs. negative numbers in Q1/24) beating our estimate of $14.4M.
• Cash costs and AISC came in well below expectations, highlighting the effects of management’s operational improvements over the last year.
Yesterday, Santacruz Silver (SCZ:TSXV) announced Q1 financials that beat our expectations due to much-improved costs and the increased silver price. Cash costs came in at $17.8/oz compared to our $22.7/oz, and AISC came in at $22.3/oz compared to our $26.7/oz. We will note that SCZ’s higher cost structure was always a pushback from investors, and this quarter shows solid progress in addressing that. Additionally, adjusted EBITDA was $27.5M in the quarter compared to our estimate of $14.4M. We are maintaining our BUY rating and are increasing our target price to C$1.60/share (prev. C$1.30/share) on SCZ.
Financial Highlights
• Revenue for the quarter came in at $70.3M (+34% YoY) vs. our estimate of $69.9M. This was led by the increased silver price.
• Gross margin for Q1 came in at 40% compared to our estimate of 31%.
• Cash cost for the quarter was $17.8/oz vs. our estimate of $22.7/oz. The cost reduction was seen across all assets aside from Zimapan, which spent a large portion of its annual capital budget in Q1 on efforts to increase future production.
• AISC for the quarter was $22.3/oz compared to our estimate of $26.7/oz.
• Adjusted EBITDA in Q1 was $27.5M, beating our estimate of $14.4M and ($1.3M) in Q1/24.
• OCF (before WC) was $13.9M for Q1 compared to our $11.5M estimate.
• Net income for Q1 was $9.5M, beating our estimate of $4.5M, benefitting from a $6.2M FX gain.
• SCZ ended the quarter with $32.5M in cash and $56.5M in debt.
Santacruz Silver Mining is engaged in the operation, acquisition, exploration and development of mineral properties in Mexico, with a primary focus on silver, but also including gold, zinc and lead. Co. is focused on meeting and maintaining its primary production objective of producing approximately 1.5 million silver equivalent ounces on a yearly basis at its producing property, the Rosario Mine. In addition, Co. is exploring three other mineral properties, being the San Felipe Project (an advanced stage project), the Gavilanes Project (an exploration project), and the El Gachi Property (an early stage exploration project).
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