Discovery Silver (TSX:DSV) released first-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.
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Access the full call at https://events.q4inc.com/attendee/749292221
Summary
Discovery Silver is on track to more than double gold production at Porcupine to over 500,000 ounces per year and develop the Caro project in Mexico with a target of producing 14 million ounces of silver annually.
The company announced a significant acquisition of Glencore Kidd operations, which will enhance milling capacity and provide exposure to critical minerals like copper, zinc, and silver.
Q1 2026 saw revenues of $285 million, a 4% increase, with EBITDA growing 41% quarter-over-quarter to $178 million, driven by higher gold prices.
Discovery Silver’s cash balance at the end of Q1 was $384.9 million, with free cash flow generation strengthening its balance sheet.
The company is advancing exploration and drilling projects, with notable progress at Hoyle Pond and TVZ zones, aiming for a resource estimate by year-end.
Management remains confident in achieving 2026 guidance, emphasizing increased production in the latter half of the year and ongoing improvements at the Dome Mill.
Full Transcript
Sarah (Conference Operator)
Good afternoon. My name is Sarah and I will be your conference operator today. At this time I would like to welcome everyone to the Discovery Silver’s first quarter 2026 conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press STAR followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Thank you. I will now turn the call over to Mark Utting, Senior Vice President, Investor relations for discovery. Mark Utting, you may begin your conference.
Mark Utting (Senior Vice President, Investor Relations)
Thanks very much operator and thanks everyone on the line for joining Discovery Silver’s first quarter 2026 conference call and webcast. Joining me today are many members of the Discovery senior management team. Speaking will be Tony Makuta, our president and CEO Allison White, our Chief Financial Officer Pierre Roc, our Chief Operating Officer Eric Calio, our Senior Vice President, Exploration and Jose Javalera, our Senior Vice President, Corporate affairs and Sustainability in Mexico. And again, there are many other members of our senior executive team in the room as well. Before we get started, I’ll remind you that during today’s call we will be making forward looking statements. These statements are based on current expectations and projections about future events. They’re subject to risks and uncertainties and actual outcomes may not be what is included in those statements. I refer you to slide two as well as our website for further information. In addition, we will also be making reference to a number of non GAAP measures during the presentation. These measures do not have any standardized meaning and they under Generally Accepted Accounting Principles (GAAP) and therefore may not be comparable to other issuers. I refer you to slide three on our deck as well as our website for more details. Finally, all dollar amounts will be in US dollars unless otherwise indicated. Now turning to the quarter.
Tony Makuta
To begin with, as many of you know, you know we’re working towards more than doubling gold production at porcupine to over 500,000 ounces per year. the same time we working towards developing our Cordero project in Mexico through which we will produce about 14 million ounces of silver per year at least over the first 10 years. You know, we plan to achieve these levels of performance while averaging the lowest half of the global cost curve for both gold and silver. And we’re going to achieve these milestones using a disciplined approach to investment with a focus on investor returns. During the first quarter there were a number of key developments in support of achieving our Growth objectives. Specifically, we announced the acquisition of Glencore Kid operations in Timmins. We also reported continued outstanding exploration results in and around Timmins. And we continued with our investment programs through which we will both grow and optimize our current operations. Getting into those in a little bit more detail. Looking at Kid on Slide 6. We announced the acquisition of the Kidd operations on March 2. We expect that transaction to close very soon, likely over the next few weeks. This is a major milestone for our company. To achieve over half a million ounces of annual gold production. We require additional milling capacity through the Kid Met site. We have an opportunity to dramatically grow processing capacity and to process different kinds of ore. There’s lots of other benefits as well, including adding valuable infrastructure that will support the future expansion of both Hoyle Pond and Tamworth, including the development of TVZ. It gives us exposure to critical minerals, copper, zinc and silver through Kid Creek Mine. Adds significantly more exploration potential to our already very large and highly prolific portfolio. Delivers cost synergies and this is a very important point. Adds a very large, highly skilled workforce that’s going to help us with our existing growth plans. Going to the next slide. This gives you a view of Kid Net site and a conceptual plan for what we expect to do and are currently evaluating. It’s a conceptual plan but it kind of points or shows you our thinking in terms of path forward. And maybe at this point point I’ll turn it over to Tony to talk about that. Okay. And maybe I’d just a couple simple things. I mean people should understand first off that the Hoyle Pond underground operations are actually under. Under the Kid Met site. And you can see that the blue rectangular box here and it’s trying to show where the location could be for the new. Any new vet phrases we we can establish for the Hoyle Pond mine as well as central location would be for a new shaft if we wanted to develop for the TBZ zone. But also I think what we show here there’s as we’ve alluded to before, there’s four circuits at the Kidd Met site and you can see where it says A division. And we sort of tried to conceptualize on here what would be involved in building and show the location of why we built a new facility. 5 to 7 million ton per annum conventional gold circuit at the plant with the Oregon crushing and how that would. How that would fit in. We still continue to use the B division which is the base metal circuit. It’s flotation circuit. The C division we’re working pretty hard right now on that. That’s about a million ton a year capacity. So looking at the aspect of bringing the board nors and run it, run it through this division as early as we can over the next six to 12 months. And that would unlock two to 3,000 tons of AM capacity in the Dome mill for conventional processing. And you can see that these circuit that’s where it’s here which is which we would turn into a cold refractory flotation circuit. But on the other side Both all the A.B. the B and C and D circuits that are here could always be utilized as combination base metal circuits if needed and old circuits as required. So give you the sense on what this could unlock for us. Basically if I you know you can look 5, 6 to 6 to 8 million sorry 77 to 9 million ton a year new gold processing assessing capacity at the Kid Met site. The A division has a conventional circuit the C division for processing 1 million ton a year for processing the board Norris and the D division which we would then use to process refractory ores in Timothy. And effectively the refractory oars would be the TVZ as we’re talking about and then general location where it is. This map doesn’t, sorry this figure doesn’t show where the Pamworld operations are in here but the Pamour open pit operations are less than a half a kilometer from the bottom of it page. And the idea would be all the Pam ores would be would be trucked and same as the oil pond ores would be trucked and processed through this new circuit. Just going on to slide 8. We’ll get to the next next key development that’s exploration progress and you know for all the production that we have and we’re going to be adding you know this is, we think it’s one of the most compelling exploration stories in the industry as well. You know we issued a press release on April 23rd. That’s our latest one. I’m not going to get into a lot of the details. Eric will get into the details of that release shortly. I’ll just at a high level say we continue to get very good results from resource conversion and extension drilling at Royal Pond Ford in Pamour. And included in that release was excellent results at a number of district targets near those operations and positive results at our near term projects, specifically Dome and tbz. And again there’s a lot more information that you’ll be hearing very soon about that. Slide 9 looks at our investment programs in the first quarter. Sustaining capital for the quarter was about 21 million mainly related to capital development, mobile equipment and infrastructure investments at Hoyle Pond and Gordon. And I’ll mention we were very much on track with our capital development activities at those mines. Also contributing with new mobile equipment at Pamour and some investments at the TMA 6 or tailings facility project as well. Staying capital was somewhat lower than we planned, which was primarily related to to the shifting of delivery schedules for new mobile equipment to the second quarter and just other quarters of the year. Growth capital totaled 40 million. Investment in the TMA 6, including our new acquisition strategy and pre stripping at Pamour accounted for the vast majority of that. And again pre stripping at Pamour was very much in line with expectations. Just going to Slide 10. This gets to the operating results during the first quarter. Allison will get into all the financial numbers in a few minutes and Pierre will then add some additional color on operations as well. You know, in our year end results we indicated that production in 2026 would be weighted to the second half of the year and the Q1 would likely be our lowest quarter of production for the year. Well, production was 60.2 thousand ounces for the first quarter. What I will say is a highlight of the quarter was Hoyle Pond. It had a very good quarter in Q1 with an average grade exceeding 12 grams per ton. Also, our total mine tons increased by 4% and we ended the quarter with stockpiles of close to 1.3 million tons, which will help us manage both our throughput levels and grades over the balance of the year. Like production, our unit costs are expected to improve significantly in the second half of the year. You know, one reason our guidance ranges were as wide as they are is because of the variability we saw coming in the quarters. I will say our AISC number for the quarter was in line with our guidance and we do expect that number to improve as we get into the second half of the year. Going to slide 11. It shows a visual of, well, Dome Mill, but specifically in the foreground, the crushing circuit. As we mentioned, we expected quarterly production this year to be lowest in Q1 and a significant reason for that was mill throughput. We did 698,000 tons in the quarter. You know, the reduction from the previous quarter. Most of that was expected. An expected reduction due to scheduled downtime and our understanding of the implications of severe winter on our crushing plant at Dome. We’ve indicated since we announced the porcupine deal beginning of last year that we were looking at replacing the three stage crushing system that it needed to be replaced. You know, that’s because it’s inefficient and contributes to high unit costs because it’s prone to breakdowns, particularly in winter conditions and ultimately because we’re going to need to move it to get it out of the way as we push back the dome pit when we bring dome mine into production. The longer term solution for this is single stage crushing and a sag mill. And that’s part of our plans going forward in terms of achieving our growth targets. The near term plan is that we are keeping increasing levels of critical spares on site and there is a newly designed secondary screening system that’s going to be delivered at the end of June that will be installed during the scheduled shutdown in July. And these steps we’re taking now are designed to help us when we get to next winter. Just going on to slide 12. This shows you our guidance and I can say we remain on track to achieve all of our guidance for 2020 26, we completed the lowest quarter of the year. We expect to see significantly higher production, particularly in Q3 and Q4. An important contributor there will be Hollinger. We began ramping up Hollinger in Q1 and actually this quarter mining about 2,000 tons a day. We expect to get over 40,000 tons from Hollinger this year. There was only a few thousand in the first quarter. We also expect to see higher levels of mill throughput supported by the large stockpiles I mentioned. With that, I’ll turn the call over to Allison White, our CFO to look at the financial results.
Allison White (Chief Financial Officer)
Thank you Mark and good afternoon everyone. On the call on slide 13. Let’s look at what a solid quarter and start. We had 2026, which reflects the continued momentum that we are building on from last year. We had robust revenues during during Q1 of 285 million, an increase of 4% quarter over quarter, primarily reflecting the higher than average gold prices throughout the quarter. We lose more tons during the quarter and coupled with the number of ounces sold over the same period, cash costs per ounce were $1,417. As previously mentioned, unit costs are projected to be the highest in the first half of the year and are scheduled to improve during the second half of 2026 as production and sales volumes increase and benefits are realized from the investment to optimize the company’s operation. All in sustaining costs averaged $2,041 per ounce sold, reflecting the higher operating cash cost per ounce sold and is partially offset by lower spend from the sustaining capital during the period. The lower than planned sustaining capital is due to the delayed timing that Mark had mentioned earlier for the delivery of new mobile equipment and for construction work that’s ongoing at the tailings TMA6 project, EBITDA grew quarter over quarter to 178 million, an increase of …
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