SCZ: Soft Q2 Production Results Due to Flood
What you need to know:• Santacruz reported its Q2/25 production results, missing our expectations due to flooding at Bolivar which has now been resolved.
• AgEq production came in at 3.5Moz compared to our estimate of 4.6Moz, representing -4% QoQ and -15% YoY.
• SCZ is up 306% since our initiation report in January, yet still remains mispriced in our view. We are increasing our target price to C$1.80/share based on 7x 2025E OCF (prev. C$1.60 based on 6x).
Yesterday, after market close, Santacruz Silver (SCZ:TSXV) announced Q2/25 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 3.5Moz AgEq in the quarter vs. our estimate of 4.6Moz. This miss was primarily attributed to flooding within the high-grade Pomabamba and Nane veins at the Bolivar Mine. With the addition of a new pump, the flooding has been controlled, and water levels have started to decrease. Despite the lost production from Bolivar, we are pleased with the performance of the Zimapan and San Lucas, making up for some of the lost production.
The market has started to wake up to the cash flow generation of SCZ’s assets at spot silver prices, with the stock up 328% YTD. Despite today’s miss, we have chosen to increase our target price on SCZ given the momentum in the silver price and resulting increased industry multiples. We are maintaining our BUY rating and increasing our target price to C$1.80/share (prev. C$1.60/share).
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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