Santacruz Silver Looks to Stabilize Production and Improve Balance Sheet

• Santa Cruz Silver Mining is focused on silver and base metals production in Mexico and Bolivia. They are 18 months post-acquisition of the Glencore assets in Bolivia and the integration is going well.
• Q2 results reflect a stabilization and transition process. The focus is on maintaining and consolidating production while reducing costs through initiatives like connecting two mines in Bolivia.
• Organic production growth opportunities have been identified, such as leasing a dedicated mill for the San Lucas trading company to free up mill capacity at the company's three main mills. This could increase production by 1.5 million ounces of silver equivalent per quarter.
• The company has access to around $40 million in bonds in Bolivia to help make the next $22.5 million payment to Glencore in March 2024. They are also working to improve the balance sheet by selling a company with $25 million in liabilities.
• Upcoming catalysts include resource estimate updates in September and production guidance for 2023 around year-end. Investors can expect updates on key initiatives like the interconnecting tunnel to show progress towards a more efficient operation.

About Santacruz Silver Mining

Santacruz Silver Mining Ltd. is a silver production and base metals mining company focused on operations in Mexico and Bolivia. The company has a market capitalization of around $80 million CAD and produces silver, zinc, lead and copper. Santacruz acquired the Glencore assets in Bolivia in late 2020 and has been focused on assimilating those operations over the past 18 months. The company aims to stabilize and incrementally grow production while reducing costs.

Interview with Arturo Préstamo Elizondo, Exectuive Chairman & Interim CEO of Santacruz Silver Mining

Financial Results Reflect Transition Period

In a recent interview, Chairman and Interim CEO Arturo Prestamo highlighted Santacruz's Q2 2022 results as reflecting a stabilization and transition process. In Q2, the company produced 5.5 million silver equivalent ounces, and 11.2 million ounces in the first half of 2022. The transition of acquiring and integrating the new Bolivian assets has presented some one-time accounting and administrative challenges as the company works to align the Bolivian operations to IFRS reporting standards. This contributed to Santacruz's share price declining from $0.57 in February to $0.24 currently. However, management believes the transition is in an advanced stage and major milestones have been achieved.

Steps to Organically Boost Production

To incrementally grow production, Santacruz is focused on several key initiatives:

• Connecting the Amigos mine and Cacique mine in Bolivia through an underground tunnel. This is expected to increase production at the Cacique mine by at least 20% starting in 2023.
• Transitioning to more narrow vein mining at the Porco mine in Bolivia, targeting higher grade ore. This method aligns with management's expertise.
• Obtaining a dedicated processing facility for the San Lucas trading unit, freeing up capacity at Santacruz's three existing mills. This could boost production by 1.5 million silver equivalent ounces per quarter.
• Continuing development at the new Rosario mine in Bolivia, with stope preparation ongoing.

Improving Cost Efficiencies

In addition to production growth, Santacruz sees opportunities to significantly reduce costs. The main drivers will be:

• The interconnection tunnel between the Cacique and Amigos mines, improving haulage efficiencies.
• Transitioning to narrow vein mining at Porco, accessing higher grade material.
• Optimization of administrative functions, leveraging synergies between Mexico and Bolivia.
• Increased purchasing power and economies of scale.

With these initiatives, investors can expect to see both production growth and lower costs in 2023.

Balance Sheet Clarity on the Horizon

Santacruz has a $22.5 million payment due to Glencore in March 2024 relating to the Bolivian mine purchases. The company is exploring options to fund this through a combination of cash flow generation, existing debt facilities, and access to around $40 million in Bolivian bonds. Additionally, the sale of a non-core subsidiary with $25 million in liabilities is at an advanced stage and should close within months. This will provide additional working capital and balance sheet clarity.

Upcoming Potential Catalysts

Some key events for investors to watch for in the coming months include:

• Release of the maiden resource estimate for the Zimapan property in Mexico, providing increased visibility into Santacruz's assets.
• Annual production and cost guidance for 2023 based on the company's operating initiatives and development plans.
• Further progress on the sale of the non-core subsidiary to raise capital and reduce liabilities.
• Ramp up of production at the new Rosario mine as stopes come online.
• Completion of the Cacique-Amigos connection tunnel and associated production boost.

Conclusion

With silver prices low, Santacruz Silver remains focused on what it can control - stabilizing its operations, reducing costs, and incrementally growing production. The company appears to be making good progress integrating its newly acquired Bolivian assets. Several catalysts in the coming months will demonstrate this progress. If Santacruz can continue executing on its optimization plans, it could emerge in a stronger position to leverage future increases in precious metals prices. Investors with a positive outlook on silver should keep Santacruz on their radar.