SCZ: Seasonally Weak Q1, Stronger Results Moving Forward
What you need to know:• Santacruz reported its Q1/25 production results, missing our expectations due to pronounced seasonality and various operational challenges which have now been resolved.
• AgEq production came in at 3.7Moz compared to our estimate of 4.5Moz, representing -10% QoQ and -5% YoY.
• SCZ is up 217% since our initiation report, yet still remains mispriced, in our view. We are increasing our target price to C$1.30/share based on 6x 2025E OCF.
This morning, Santacruz Silver Mining Ltd. (SCZ:TSXV) announced its Q1/25 production results from its operating mines and San Lucas ore sourcing business. The production results missed our estimates with total silver equivalent ounces produced of 3.7Moz AgEq in the quarter vs. our estimate of 4.5Moz. This was attributed to pronounced seasonality and operational challenges which have since been resolved. SCZ is also late on its Q1 financial results which will be reported later this week. The market has finally started to wake up to the cash flow generation of SCZ’s assets at spot silver prices, the stock up 233% YTD. We are maintaining our BUY rating and are increasing our target price to C$1.30/share (previously C$0.90/share) on SCZ.
Figure 1: Q1/25 Production Highlights
Q1 Production Results
Bolivar Mine
In Q1/25, the Bolivar mine processed 62.4Kt of ore (-10% QoQ, -14% YoY) and produced 0.8Moz AgEq (-15% QoQ, -13% YoY), made up of 421Koz Ag and 4.0Kt Zn. This compares to our estimates of 70.6Mt of material processed and 1.0Moz of AgEq production. Management attributed the decrease to seasonality and temporary operational constraints which have been resolved.
Porco Mine
In Q1, Porco processed 47.5Kt of ore (-12% QoQ, -7% YoY), yielding 0.4Moz AgEq (-13% QoQ, -21% YoY), made up of 121Koz Ag and 2.7Kt Zn. This compared to our estimates of 48.8Kt of ore processed and 0.5Moz AgEq produced. The YoY and QoQ decline was due to seasonal weakness and equipment availability issues (which have been fully revolved).
Caballo Blanco Group
In Q1, the Caballo Blanco Group processed 51.6Kt (-15% QoQ, -29% YoY) of ore and producing 0.7Moz AgEq (-17% QoQ, -11% YoY), made up of 313Koz Ag and 3.5Kt Zn. This compared to our estimates for material processed of 53.6Kt and AgEq production of 0.7Moz. The decline was due to Caballo undergoing a strategic reorganization to optimize metallurgical performance, and as such, the Reserva mine’s ore is now mixed with ore sourced from the San Lucas trading business. Our model reflects this going forward. As a result of these changes, mineral output per tonne increased significantly as seen by a 49% increase in silver head grades and a 3% increase in recoveries.
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).
Atrium Research provides institutional quality issuer paid research on North American public equities using deep fundamental analysis. Our research reports are disseminated through Bloomberg, FactSet, Capital IQ, Reuters and many more, as well as through our social media and email distribution lists.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.