Discovery Silver Corp. (TSX: DSV, OTCQX: DSVSF)
(“Discovery” or the “Company”) today announced financial results
for the three months ended March 31, 2024 (“Q1 2024”). The Company
also provided a summary of key events since the beginning of 2024,
including the release on February 20, 2024, of the feasibility
study results (the “Feasibility Study” or “Study”) for Discovery’s
100%-owned Cordero silver project (“Cordero” or the “Project”) in
Chihuahua State, Mexico. All figures are stated in Canadian dollars
unless otherwise noted.
Tony Makuch, CEO, commented: “During Q1 2024, we
achieved a major milestone with the release of the Feasibility
Study for our Cordero Project. The Study results clearly establish
Cordero as one of the world’s largest silver development projects
both in terms of reserves and estimated production. The Project
will average 37 million silver equivalent (“AgEq”)1 ounces (“Moz”)
annually over the first 12 years with low unit costs that will
generate attractive economic returns. Very importantly, the Project
will deliver substantial socio-economic benefits in Mexico in the
form of job creation, skills training, direct investment, the
purchasing of local goods and services and tax revenue, and will be
developed and operated in a manner that achieves best practice in
responsible mining. In addition, we will be bringing valuable
technology and infrastructure as part of the Project that will
provide important benefits in key areas like water treatment and
purification. We will also be continuing our work to build
Cordero’s presence in the community around Parral, and in Chihuahua
State, through ongoing direct participation in, and support for,
local initiatives, organizations and institutions.
“Another key feature of the Cordero project is
the tremendous leverage it provides to the price of silver. The
Project’s robust economic returns were estimated using a silver
price of US$22 per ounce. To date in 2024, the price of silver has
increased close to 20%, to over US$28 per ounce, fueled largely by
favourable market fundaments with the silver market expected to be
in deficit for the fourth consecutive year in 2024 reflecting
record demand in key sectors like electric vehicles, solar and
other forms of green energy. At current spot metal prices2, the
Project’s after-tax net present value (“NPV5%”) increases by 70%,
from US$1.2 billion to US$2.0 billion and reaches US$3.0 billion in
Year 4 when the Project reaches final completion to 51,000 tonnes
per day. This significant leverage does not include the potential
benefit of growth in reserves that could occur at higher prices,
with there being 240 million tonnes of Measured and Indicated
Resource situated outside the Feasibility Study reserve pit that
was estimated using a silver price of US$24 per ounce.
“Looking ahead, our work program in 2024 is
aimed at further de-risking Cordero, continuing to advance
permitting, acquiring or leasing additional surface access rights
and making further progress with our community relations program as
we work towards completing permitting and financing for the
Project.”
HIGHLIGHTS FROM Q1 2024:
- 2024
Work Program: Highlights of the 2024 work program were
released in January 2024 and included plans to complete Front-End
Engineering Design (“FEED”) work to permit the ordering of long
lead-time items; additional permitting, including a target to
submit the Change of Land Use (“Cambio de Uso de Suelo” or “CUS”)
during the third quarter; engineering and permitting work related
to power generation and transmission and water treatment; further
progress acquiring or leasing land surface rights; and continuing
to advance community relations work in support of the permitting
process.
-
Feasibility Study: Results of the Feasibility
Study for Cordero were released on February 20, 2024. The results
position Cordero as a world-leading silver development project with
large-scale, long-life, low-cost production that will generate
attractive returns, deliver substantial benefits for Mexico and
achieve best practice in responsible mining.
-
Large-scale, long-life, low-cost
production: 19-year life-of-mine (“LOM”) with
average annual production of 33 Moz AgEq LOM and average all-in
sustaining costs3 under US$13.50 per AgEq ounce.
-
Attractive returns: Two-stage development plan
contributes to favourable economics, with a LOM NPV5% of US$1.2
billion at US$22 per ounce silver, which increases to US$2.2
billion in Year 4 when the Project reaches final completion.
-
Substantial benefits for Mexico: Total investment
of US$1.4 billion (including a US$606 million initial investment),
2,500 direct jobs created during construction, peak employment of
over 1,000 direct jobs during operation, an estimated US$4 billion
of goods and services purchased and expected tax payments of
approximately US$1.4 billion within Mexico.
-
Industry-leading environmental standards:
Third-party reviews of proposed environmental practices completed
to ensure compliance with industry-leading standards; US$130
million budgeted for site restoration and rehabilitation;
significant investment included for infrastructure and technology
to recycle wastewater with treated water to be the primary source
of water for the Project.
- Land access agreement
reached: The Company finalized a land access agreement for
the use of 600 hectares of land adjacent to the Project in March
2024, which will be used for the access road to the mine as well as
for water storage. The agreement was reached with Ejido Cordero, a
local land cooperative, and is part of the Company’s ongoing
efforts to advance and de-risk the Cordero project.
- Increase in silver
prices: Spot silver prices have increased close to 20%
year to date in 2024 (as of May 13, 2024) to US$28.39 per ounce.
Higher silver prices largely reflected continued strong market
fundamentals, with the Silver Institute4 projecting a market
deficit in 2024 of over 200 million ounces, the fourth consecutive
year of market deficits and the second highest deficit in over 20
years. According to the Silver Institute, market deficits are being
driven by record levels of industrial demand for silver, largely
related to the use of silver in electric vehicles, solar panels and
other forms of green energy, as well as the emerging use of silver
in many artificial intelligence applications. Mine production of
silver declined by 1% in 2023, with another slight reduction
expected in 2024.
- Please see the Technical Disclosure section of this news
release for more information related to AgEq production.
- Current spot metal prices as at May 13, 2024 include silver:
US$28.39 per ounce; gold: US$2,346 per ounce, zinc: US$1.34 per
pound and lead: US$1.02 per pound versus Feasibility Study prices
of silver: US$22.00 per ounce; gold: US$1,600 per ounce; zinc:
US$1.20 per pound; lead: US$1.00 per pound.
- Non-GAAP Measure. Please see the Technical Disclosure and
Non-GAAP Measures sections of this news release.
- Please see the Silver Institute’s World Silver Survey 2024, and
related news release, available at www.silverinstitute.org.
SELECTED FINANCIAL DATA:
The following selected financial data is
summarized from the Company’s unaudited condensed interim
consolidated financial statements and related notes thereto (the
“Financial Statements”) and the Management’s Discussion and
Analysis (“MD&A”) for the quarter ended March 31, 2024.
The Company’s Financial Statements and MD&A
are available at www.discoverysilver.com or on SEDAR
at www.sedarplus.ca.
|
Q1 2024 |
Q1 2023 |
Net Loss |
$ |
(680,805) |
$ |
(3,999,718) |
Basic and diluted per share |
$ |
(0.00) |
$ |
(0.01) |
Total comprehensive income (loss) |
$ |
1,118,080 |
$ |
(3,344,648) |
Total weighted average shares outstanding |
|
395,973,316 |
|
352,071,321 |
|
March 31, 2024 |
December 31, 2023 |
Cash and cash equivalents |
$ |
50,704,880 |
$ |
58,944,459 |
Total assets |
$ |
147,418,451 |
$ |
146,065,998 |
Total current liabilities |
$ |
11,443,293 |
$ |
12,168,225 |
Working capital(1) |
$ |
42,866,483 |
$ |
49,691,371 |
Total Shareholders’ equity |
$ |
131,420,682 |
$ |
129,421,106 |
(1) Defined as current assets less current
liabilities from the Company’s consolidated financial
statements.
About Discovery
Discovery’s flagship project is its 100%-owned
Cordero project, one of the world’s largest undeveloped silver
deposits. The Feasibility Study completed in February 2024
demonstrates that Cordero has the potential to be developed into a
large-scale, long-life project with low unit costs and attractive
economic returns that offers the combination of margin, size and
scalability. Cordero is located close to infrastructure in a
prolific mining belt in Chihuahua State, Mexico.
On Behalf of the Board of Directors,Tony
Makuch, P.EngPresident, CEO & Director
For further information contact:
Forbes
Gemmell, CFAVP Corporate DevelopmentPhone:
416-613-9410Email: forbes.gemmell@discoverysilver.comWebsite:
www.discoverysilver.com
Qualified
Person
Gernot Wober, P.Geo, VP Exploration, Discovery
Silver Corp. and Pierre Rocque, P.Eng., an independent consultant
to the Company, both “Qualified Persons” as such term is defined in
NI 43-101, are the Company's designated Qualified Persons for this
news release within the meaning of National Instrument 43-101
Standards of Disclosure for Mineral Projects (“NI 43-101”). Mr.
Wober and Mr. Rocque have reviewed and validated that the
information contained in this news release is accurate.
Technical Disclosure
- The Feasibility
Study project team was led by Ausenco Engineering Canada ULC
(“Ausenco”), with support from AGP Mining Consultants Inc. (“AGP”),
WSP USA Inc. (“WSP”) and RedDot3D Inc.
- Mineral
resources that are not mineral reserves do not have demonstrated
economic viability.
- A full technical
report has been prepared in accordance with NI 43-101 and was filed
on SEDAR on March 28, 2024.
- AgEq produced is
metal recovered in concentrate. AgEq payable is metal payable from
concentrate. AgEq produced and AgEq payable are calculated as Ag +
(Au x 72.7) + (Pb x 45.5) + (Zn x 54.6); these factors are based on
metal prices of Ag - $22/oz, Au - $1,600/oz, Pb - $1.00/lb and Zn -
$1.20/lb.
- AISC is
calculated as: [Operating costs (mining, processing and G&A) +
Royalties + Concentrate Transportation + Treatment & Refining
Charges + Concentrate Penalties + Sustaining Capital (excluding
$37M of capex for the initial purchase of mining fleet in Year 1)]
/ Payable AgEq ounces.
NON-GAAP MEASURES:
The Company has included certain non-GAAP
performance measures and ratios as detailed below. In the mining
industry, these are common performance measures and ratios but may
not be comparable to similar measures or ratios presented by other
issuers and the non-GAAP measures and ratios do not have any
standardized meaning. Accordingly, these measures and ratios are
included to provide additional information and should not be
considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS Accounting Standards.
Total cash costs per ounce, all-in sustaining costs, and free cash
flow, are all forward-looking non-GAAP financial measures or
ratios. As the Cordero Project is not in production, these
prospective non-GAAP financial measures or ratios may not be
reconciled to the nearest comparable measure under IFRS and there
is no equivalent historical non-GAAP financial measure or ratio for
these prospective non-GAAP financial measures or ratios. Each
non-GAAP financial measure and ratio used herein is described in
more detail below.
TOTAL CASH COSTS
The Company calculated total cash costs per
ounce by dividing the sum of operating costs, royalty costs,
production taxes, refining and shipping costs, net of by-product
silver credits, by payable ounces. While there is no standardized
meaning of the measure across the industry, the Company believes
that this measure is useful to external users in assessing
operating performance.
ALL-IN SUSTAINING COSTS
The Company has provided an all-in sustaining
costs performance measure that reflects all the expenditures that
are required to produce an ounce of silver from operations. While
there is no standardized meaning of the measure across the
industry, the Company’s definition conforms to the all-in
sustaining cost definition as set out by the World Gold Council in
its updated Guidance Note issued in 2018. The Company believes that
this measure is useful to external users in assessing operating
performance and the Company’s ability to generate free cash flow
from current operations. Subsequent amendments to the guidance have
not materially affected the figures presented.
FREE CASH FLOW
Free Cash Flow is a non-GAAP performance measure
that is calculated as cash flows from operations net of cash flows
invested in mineral property, plant, and equipment and exploration
and evaluation assets. The Company believes that this measure is
useful to the external users in assessing the Company’s ability to
generate cash flows from its mineral projects.
FORWARD-LOOKING STATEMENTS:
Neither TSX Exchange nor its Regulation Services Provider (as
that term is defined in policies of the TSX Exchange) accepts
responsibility for the adequacy or accuracy of this release.
This news release is not for distribution to United States
newswire services or for dissemination in the United States.
This news release does not constitute an offer
to sell or a solicitation of an offer to buy nor shall there be any
sale of any of the securities in any jurisdiction in which such
offer, solicitation or sale would be unlawful, including any of the
securities in the United States of America. The securities have not
been and will not be registered under the United States Securities
Act of 1933, as amended (the “1933 Act”) or any state securities
laws and may not be offered or sold within the United States or to,
or for account or benefit of, U.S. Persons (as defined in
Regulation S under the 1933 Act) unless registered under the 1933
Act and applicable state securities laws, or an exemption from such
registration requirements is available.
Cautionary Note Regarding Forward-Looking
Statements
This news release may include forward-looking
statements that are subject to inherent risks and uncertainties.
All statements within this news release, other than statements of
historical fact, are to be considered forward looking. Although
Discovery believes the expectations expressed in such
forward-looking statements are based on reasonable assumptions,
such statements are not guarantees of future performance and actual
results or developments may differ materially from those described
in forward-looking statements. Statements include but are not
limited to the feasibility of the Project and its attractive
economics and significant exploration upside; construction decision
and development of the Project, timing and results of the
feasibility study and the anticipated capital and operating costs,
sustaining costs, net present value, internal rate of return, the
method of mining the Project, payback period, process capacity,
average annual metal production, average process recoveries,
concession renewal, permitting of the Project, anticipated mining
and processing methods, feasibility study production schedule and
metal production profile, anticipated construction period,
anticipated mine life, expected recoveries and grades, anticipated
production rates, infrastructure, social and environmental impact
studies, the completion of key de-risking items, including the
timing of receipt permits, availability of water and power,
availability of labour, job creation and other local economic
benefits, tax rates and commodity prices that would support
development of the Project, and other statements that express
management's expectations or estimates of future performance,
operational, geological or financial results Information concerning
mineral resource/reserve estimates and the economic analysis
thereof contained in the results of the feasibility study are also
forward-looking statements in that they reflect a prediction of the
mineralization that would be encountered, and the results of
mining, if a mineral deposit were developed and mined.
Forward-looking statements are statements that are not historical
facts which address events, results, outcomes or developments that
the Company expects to occur. Forward-looking statements are based
on the beliefs, estimates and opinions of the Company’s management
on the date the statements are made and they involve a number of
risks and uncertainties.
Factors that could cause actual results to
differ materially from those described in forward-looking
statements include fluctuations in market prices, including metal
prices, continued availability of capital and financing, and
general economic, market or business conditions, the actual results
of current and future exploration activities; changes to current
estimates of mineral reserves and mineral resources; conclusions of
economic and geological evaluations; changes in project parameters
as plans continue to be refined; the speculative nature of mineral
exploration and development; risks in obtaining and maintaining
necessary licenses, permits and authorizations for the Company’s
development stage and operating assets; operations may be exposed
to new diseases, epidemics and pandemics, including any ongoing or
future effects of COVID-19 (and any related ongoing or future
regulatory or government responses) and its impact on the broader
market and the trading price of the Company’s shares; provincial
and federal orders or mandates (including with respect to mining
operations generally or auxiliary businesses or services required
for operations) in Mexico, all of which may affect many aspects of
the Company's operations including the ability to transport
personnel to and from site, contractor and supply availability and
the ability to sell or deliver mined silver; changes in national
and local government legislation, controls or regulations; failure
to comply with environmental and health and safety laws and
regulations; labour and contractor availability (and being able to
secure the same on favourable terms); disruptions in the
maintenance or provision of required infrastructure and information
technology systems; fluctuations in the price of gold or certain
other commodities such as, diesel fuel, natural gas, and
electricity; operating or technical difficulties in connection with
mining or development activities, including geotechnical challenges
and changes to production estimates (which assume accuracy of
projected ore grade, mining rates, recovery timing and recovery
rate estimates and may be impacted by unscheduled maintenance);
changes in foreign exchange rates (particularly the Canadian
dollar, U.S. dollar and Mexican peso); the impact of inflation;
geopolitical conflicts; employee and community relations; the
impact of litigation and administrative proceedings (including but
not limited to mining reform laws in Mexico) and any interim or
final court, arbitral and/or administrative decisions; disruptions
affecting operations; availability of and increased costs
associated with mining inputs and labour; delays in construction
decisions and any development of the Project; changes with respect
to the intended method of mining and processing ore from the
Project; inherent risks and hazards associated with mining and
mineral processing including environmental hazards, industrial
accidents, unusual or unexpected formations, pressures and
cave-ins; the risk that the Company’s mines may not perform as
planned; uncertainty with the Company's ability to secure
additional capital to execute its business plans; contests over
title to properties; expropriation +or nationalization of property;
political or economic developments in Canada and Mexico and other
jurisdictions in which the Company may carry on business in the
future; increased costs and risks related to the potential impact
of climate change; the costs and timing of exploration,
construction and development of new deposits; risk of loss due to
sabotage, protests and other civil disturbances; the impact of
global liquidity and credit availability and the values of assets
and liabilities based on projected future cash flows; risks arising
from holding derivative instruments; and business opportunities
that may be pursued by the Company. There can be no assurances that
such statements will prove accurate and, therefore, readers are
advised to rely on their own evaluation of such uncertainties.
Discovery does not assume any obligation to update any
forward-looking statements except as required under applicable
laws. The risks and uncertainties that may affect forward-looking
statements, or the material factors or assumptions used to develop
such forward-looking information, are described under the heading
"Risks Factors" in the Company’s Annual Information Form dated
March 28, 2024, which is available under the Company’s issuer
profile on SEDAR+ at www.sedarplus.ca.
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