SCZ: Another Quarter of Strong Cashflow & Lower Costs
What you need to know:• Santacruz reported Q2 revenue of $73.3M (+4% YoY) vs. our estimate of $72.1M on a 15% decline in produced ounces.
• However, cost reduction was a theme for the quarter, with cash costs coming in at $19.48/oz vs. our estimate of $22.6/oz. This led to adjusted EBITDA of $26.8M compared to our estimate of $21.0M and $16.0M reported in Q2/24.
• SCZ ended the quarter with $52.0M in cash and $55.0M in debt.
Yesterday, Santacruz Silver (SCZ:TSXV) announced Q2 financial results that largely beat our estimates due to major cost reduction across its assets. Cash costs came in at $19.5/oz compared to our $22.6/oz estimate, and AISC came in at $23.0/oz compared to our $28.1/oz estimate, led by the Caballo Blanco Group. SCZ ended the quarter in a slight net debt position of $3M, an impeccable improvement when looking back at the $176M net debt in Q4/23. We are maintaining our BUY rating and our C$1.80/share target price on SCZ.
Financial Highlights
• Revenue for Q2 came in at $73.3M (+4% YoY) vs. our estimate of $72.1M. This was led by the increased silver price ($32.37/oz) as production declined during the quarter (see below).
• Gross margin for Q2 came in at 34.5% compared to 22.5% in Q2/24.
• Cash cost for the quarter was $19.48/oz vs. our estimate of $22.6/oz and $21.66/oz in Q2/24. SCZ saw a YoY cost reduction across all of its assets, but the major standout was the Caballo Blanco Group, which had a cash cost of $10.85/oz compared to $12.66/oz last quarter and $21.15/oz in Q2/24.
• AISC for the quarter was $22.95/oz compared to our estimate of $28.1/oz. All assets saw a YoY AISC decline aside from Zimapan.
• Adjusted EBITDA in Q2 was $26.8M, well ahead of our estimate of $21.0M and $16.0M in Q2/24.
• OCF (before WC) was $21.7M for Q2 compared to our $15.4M estimate. OCF (after WC) was $32.2M.
• Net income for Q2 was $21.0M, smashing our estimate of $8.4M, benefitting from a $3.1M FX gain.
• SCZ ended the quarter with $52.0M in cash and equivalents and $55.0M in debt, nearly placing the Company in a net cash position.
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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