Americas Gold & Silver - A Turnaround Story With Significant Silver Exposure

• Americas Gold & Silver (TSX: USA) is implementing a turnaround strategy at its Galena Mine in Idaho and Mexican operations, led by CEO Paul Huet who previously worked at Klondex and Karora Resources
• The company's largest shareholder is Eric Sprott (20% ownership) with institutional ownership reportedly increasing from 8% to nearly 60% in approximately 75 days
• Management plans operational changes including implementing long-hole mining methods, equipment upgrades, and increased mill utilization which may impact production levels
• Silver market currently shows supply deficits (reported at 200M oz annually) with industrial demand growth, while Eric Sprott suggests historical price patterns may be changing
• The stock currently trades at 0.4-0.5x NAV compared to peer multiples of 1.0-1.5x according to management, with production reported at 2.3M oz annually with targets to increase

Introduction to Americas Gold & Silver

Americas Gold & Silver Corporation is a silver-focused mining company with operations in North America. Led by Chairman and CEO Paul Huet, the company operates the historic Galena Mine in Idaho's Silver Valley and maintains additional assets in Mexico.

"Americas Gold & Silver is a silver company in the US. For those who don't know, we have an asset in Idaho, the Galena mine, and then we've got an asset in Mexico. And it's a complete turnaround story, very similar to what we have done in the past with other companies like Klondex and Karora," explained Huet during the interview.

The company's largest shareholder is Eric Sprott, who owns approximately 20% of the company. The professional relationship between Huet and Sprott began approximately a decade ago and has included previous mining ventures.

"We met about 10 years ago at Klondex. And I was very thrilled to become chairman and CEO of Karora. Eric was the largest shareholder of Karora. As you know, we merged Karora with Westgold last year. It was a complete turnaround story after the Father's Day discovery," noted Huet, referencing their past collaboration.

Prior to becoming CEO of Americas Gold & Silver, Huet served as Sprott's technical advisor for the Galena Mine for approximately one year, providing him with familiarity regarding the asset's characteristics and potential operational adjustments.

Interview with Chairman & CEO, Paul Huet & Eric Sprott

The Turnaround Strategy for Galena Mine

The Galena Mine is located in Idaho's Silver Valley, a district with over a century of production history and more than 150 million ounces of silver produced to date according to management. The company has identified several operational changes it plans to implement at the property.

Huet described the strategy for Galena as following methods he utilized at previous mining operations:

"All we have to do is repeat some of the same things we did at Karora that were successful. And that was an easy step: change the management team on site, bring in some new equipment, which just arrived yesterday," explained Huet.

A notable operational change involves the mining method. Currently, Galena utilizes jackleg drilling methods that produce 80-100 ton blasts. Huet notes that neighboring operations employ long-hole mining methods that produce 10,000-ton stopes in a single blast, suggesting a potential efficiency difference.

"Our neighbors are doing 100% long-hole and they're blasting 10,000 tons stopes," said Huet. "When we start injecting this long-hole and we got two new drills coming, we've got the equipment that I talked about earlier. When we start long-holing, that changes our costs altogether."

The company reports completing its first drop-raise in nearly a decade, marking a step toward this methodological shift. Another operational focus includes mill utilization. Currently, the mill operates three days per week, which differs from the continuous operations common in the mining industry.

"We got four shafts, two mills, using one mill three days a week. You talk about what's a low-hanging fruit—get your mill running seven days a week like every other mill in the world," Huet stated.

Institutional Support & Shareholder Confidence

Since Huet took over as CEO in December 2024, Americas Gold & Silver reports a change in its shareholder composition. According to management, institutional ownership increased from approximately 8% to nearly 60% in approximately 75-80 days.

"We were on day one about 8% institutionally held. Today, which is what 75 - 80 days later, we're almost 60% institutionally held. What a shift in register," Huet noted. "That means we've got a lot of institutions who believe in what we're doing and support it and who were in desperate need of a good silver story."

At Karora Resources (formerly RNC Minerals), Huet's previous company, he reports that the team met 19 out of 20 quarterly guidance targets across five years. The current management team states they have been actively communicating their vision, meeting with over 112 investment accounts in the first 100 days of Huet's tenure.

Huet has also made personal investments in the company. "Look at how much stock I own. You can go on SEDI and look at the filings here, and I am in one of those top five, and I did write some big checks," Huet stated. "This is not a high-risk gamble for me. It's the safest position, safest investment I've ever done."

The Silver Market Dynamics

Silver prices have risen from approximately $20 per ounce a year ago to $33 at the time of the interview. Eric Sprott shared his perspective on the silver market during the discussion.

Sprott expressed his view on historical silver price movements: "I have been in the camp that believes silver has been manipulated for the last 50 years, as was gold manipulated for the last, I guess, 49 years now. And it stopped about a year ago when gold went through 2,000 and immediately went to 3,000."

He discussed physical demand trends in the market:

"The demand for physical metal has changed in the market. So we see these things where, you know, the LBMA [London Bullion Market Association] loses 72 million ounces of silver in January. Well, that's what we produce in a month in the world."

Regarding supply and demand, Sprott stated the market has experienced a 200 million ounce annual deficit for five consecutive years. He also noted industrial applications for silver are expanding across sectors including renewable energy, battery technologies, and artificial intelligence infrastructure.

"The shortage is so large and the outlook for the uses of silver is just incredibly optimistic. I listened to somebody from McKinsey talking about how much the demand for solid-state batteries in cars is going to do to these metal markets. I mean, you're talking about 3 and 4 and 5x difference in a decade," Sprott explained.

Regarding price projections, Huet indicated silver could reach $50 per ounce, while Sprott offered a different perspective: "My own view is with gold at 3,000, silver should be at 200. It always traded 15 to 1 to the price of gold. It's mined at 8 to 1, and it's trading at 90 to 1 now."

Operational Improvements & Quick Wins

In addition to the proposed shift to long-hole mining, Americas Gold & Silver has outlined several operational improvements that management believes could impact near-term results:

• Shaft capacity upgrades: The company reports having increased capacity in the #3 shaft from 42 tons per hour to over 60 tons per hour by changing personnel and scheduling, with a stated target of 110 tons per hour after planned upgrades.
• Byproduct credits: According to management, the Galena concentrate contains copper, antimony, and gold (7g/t), but the company hasn't been receiving payment for these metals. They suggest that capturing these byproducts through metallurgical improvements could potentially enhance revenue.
• Team optimization: Huet commented on the existing workforce while indicating they needed different leadership and resources. "We've got some of the best miners you're going to find in the world. You go to Idaho and you see some of our miners. They are extremely good people. We needed different, we needed to give them different resources, different mining methods and lead them differently."
• Paste backfill plant: The company indicates it is allocating approximately $8 million for a paste backfill plant, which management believes will provide greater geotechnical stability and potentially enable different mining methods. "In this type of rock where there are some geotechnical strains, we need to make sure that we're doing things safely for our miners," Huet explained.

The company suggests these improvements could collectively impact throughput and production volumes over time.

Exploration & Future Growth Plans

While focusing on operational improvements, Americas Gold & Silver has outlined plans for exploration investment at both its Idaho and Mexican operations. The company indicates it plans to allocate between $3-5 million for exploration at each asset in 2025, which would represent an increase from previous years.

"There's no doubt that exploration at both Mexico and Galena are going to be very important. We're going to start seeing numbers this year, exploration between the $3 to $5 million at each asset," said Huet. "Remember, last year you're going from zero. So we pushed the envelope to five."

Management states that additional capital expenditures include approximately $7 million for equipment upgrades and $8 million toward the paste plant. The company also indicates it is investing in waste development to address production variability and work toward more consistent grade profiles.

In Mexico, the company projects it will access the EC120 zone by Q3 2025, which management believes could impact production at that operation.

"Last year we did about 1.3 million ounces at Galena. We did about a million ounces in Mexico. So call it 2.3 million ounces," Huet stated. Looking ahead, he referenced potential for production levels of "three, four, five million ounces a year. The year after year above seven, things start to change really, really quickly."

Setting Expectations & Valuation Insights

Management has provided some perspective on near-term expectations. Huet described 2025 as "a building year" for Galena, with production projected to remain relatively flat while operational improvements are implemented. For the Mexican operations, the outlook appears different.

"In Mexico, we'll be in EC120 by Q3. So in Mexico we expect to step up from where we were last year. So guidance surprisingly will be better than last year," Huet noted.

Regarding valuation, Huet suggested Americas Gold & Silver is undervalued despite the share price doubling since September 2023. He referenced the company trading at approximately 0.4-0.5x NAV compared to peer multiples of 1.0-1.5x.

"Find another silver producer that's going to be producing the amount of silver that we're going to be putting out on guidance that isn't trading at one to one point five times now or even better," he stated. "We are absolutely undervalued and I don't think that—I know it."

Huet also suggested that as production potentially grows toward 5-7 million ounces annually, the company could reach a valuation between $1.7-2.0 billion, compared to its current market capitalization of approximately $450 million.

Investment Thesis for Americas Gold & Silver

• Management Experience: CEO Paul Huet has previous experience at Klondex and Karora Resources, where he implemented operational changes and worked on similar mining assets
• Silver Market Exposure: As a company with significant silver production (80% silver), AG&S provides investors with exposure to silver price movements and market dynamics
• Operational Change Plans: Proposed implementation of long-hole mining, equipment upgrades, and mill optimization may impact production levels and operating costs
• Relative Valuation: Management states the company trades at 0.4-0.5x NAV versus peer multiples of 1.0-1.5x, which may present valuation considerations if operational improvements materialize
• Shareholder Structure: 20% ownership by Eric Sprott and reported increasing institutional ownership may influence corporate governance and strategic direction

Americas Gold & Silver represents a company in transition as it implements operational changes at its silver mining assets in Idaho and Mexico. Management has outlined plans to modify mining methods, upgrade equipment, and optimize existing infrastructure with the goal of improving productivity and financial performance. The company has the backing of Eric Sprott as its largest shareholder and reports increased institutional ownership in recent months.

The company operates in a silver market characterized by evolving supply-demand dynamics, with industrial applications potentially influencing future consumption patterns. Management believes the company offers investors a leveraged opportunity to participate in both improved operations and a potentially robust silver bull market. As Paul Huet succinctly stated:

"This is not a high-risk gamble for me. It's the safest position, safest investment I've ever done. So we are very undervalued even though we've doubled. People have not missed this story at all, not one bit. We've got a lot of room to go from here as we continue to deliver quarter after quarter after quarter."

Silver Market Macro Thematic Analysis

The silver market is currently experiencing dynamics influenced by both industrial demand trends and monetary considerations. Unlike gold, which primarily functions as a monetary metal and store of value, silver serves a dual role as both an industrial commodity and precious metal.

From an industrial perspective, silver's electrical conductivity properties make it a component in various applications related to the energy transition. Solar panels, electric vehicles, 5G infrastructure, and other technologies utilize silver in varying quantities. Industry estimates suggest that a single electric vehicle contains approximately 25-50 grams of silver, while solar panels use roughly 20 grams per panel. As these sectors continue to develop, this may influence silver demand patterns.

Regarding supply, global silver mine production has remained at approximately 800-820 million ounces annually for several years according to industry reports, while market observers note persistent supply-demand imbalances. Primary silver mines account for approximately 27% of global production, with the majority coming as byproducts from base metal operations, which affects production dynamics.

Silver also maintains monetary characteristics that receive attention during periods of currency and inflation considerations. Eric Sprott points out a market ratio observation: silver has historically traded at a 15:1 ratio to gold and is mined at an 8:1 ratio, though it currently trades at approximately 90:1, representing a deviation from historical patterns.

The silver market's size relative to other commodity markets means that changes in investment demand may influence price movements. Physical delivery activity across exchanges such as COMEX and LBMA continues to be monitored by market participants.

As Sprott noted in the interview, "The whole investment in precious metals by the world financial markets [is] 0.2 of 1%. 0.2. And the number one performing group in the first quarter, and it went up, whatever it was, 25, and the market goes down 10. So we got a 35-point difference already in a quarter."

The combination of supply-demand characteristics, industrial applications, monetary considerations, and institutional allocation levels represents factors that may influence silver prices—potentially affecting companies with significant silver production like Americas Gold & Silver.