Sierra Madre Gold & Silver: If You Prefer your Mexican Mines Permitted

• Sierra Madre aims to restart gold and silver production at the fully permitted Guitarra mine complex in Mexico within 12-18 months.
• Extensive existing infrastructure and underground development allows for fast-track restart at low cost.
• Processing plant capacity can be expanded from current 350 tpd to 1,000 tpd using operating cash flows.
• Focus is on bringing high grade underground deposits into production first to generate early cash flow.
• Longer term goal is to expand production and exploration across the broader district concessions.

Revitalizing Production at Sierra Madre's Guitarra Mine

Sierra Madre Gold & Silver is moving to restart gold and silver production at the company's fully permitted Guitarra mine complex located in the prolific Temascaltepec mining district of Mexico. In a recent interview, Sierra Madre CEO and Executive Chairman Greg Liller laid out the company's strategy and timeline for bringing the mine back into operation after previous owner First Majestic Silver put it on care and maintenance in 2018.

With over 40 years of experience and a track record of building seven mines throughout his career, Liller expressed confidence that Sierra Madre can have Guitarra back in production within 12-18 months. He highlighted the extensive existing infrastructure already in place and minimal capital requirements as key advantages.

The Guitarra mine complex contains multiple deposits, including the namesake Guitarra mine situated adjacent to the processing plant. Nearby mines within trucking distance include the Coloso and Nazareno mines 3.4 km away. The asset previously operated successfully from 2012-2018 under First Majestic, producing gold equivalent ounces of around 70,000-80,000 per year.

According to Liller, "the mine’s all ready to go. The stops were in production when it was shut down so we can go back into those same stops, bring them into production." With much of the development work already completed through the extensive historical underground workings, Liller emphasized the relatively low execution risk and costs involved with restarting production.

Utilizing Existing Infrastructure is Key

A central aspect of Sierra Madre's restart plan is utilizing the infrastructure and equipment left behind when First Majestic put Guitarra on care and maintenance. Liller highlighted that the processing plant, including multiple ball mills, crushing and flotation circuits are fully functional and only require minor upgrades to be operational. Underground mining equipment like scoops, jumbos and jacklegs are also still on site and can be refurbished.

Liller explained, "We've got our 1400 drill holes now, the mines all ready to go...My ideas with Genco kind of revolved around some bulk tonnage ideas, and we actually did a feasibility study with very positive results for four open pits. I now we're looking at going back to those same deposits that were defined in that feasibility study and looking at modeling it up for mining them underground."

By utilizing the existing development and infrastructure, Liller estimates Sierra Madre can bring production back online for "significantly less than $10 million." The plant has a current capacity of 350 tons per day (tpd) with one additional ball mill required to bring it to 500 tpd. Liller's plan calls for ultimately expanding to 1,000 tpd production, which the company anticipates funding through operating cash flows.

Fast Track to Production

Given the infrastructure already in place, Sierra Madre is focused on fast tracking Guitarra back into first production. The company's headcount is already at 100 employees, drawing on workers laid off when the mine was idled. Liller expressed confidence the local workforce would return given the restart's positive impact on the community.

With extensive historical production records from its past operator, Sierra Madre has detailed insights into Guitarra's cost structure and economics. The company's leadership also benefits from familiarity with the asset, including Liller's previous experience as President of Genco Resources when Guitarra was drilled out.

According to Liller, Sierra Madre already has "all the costs associated with that, so we can get the high grade stuff going back at the Colosso and Nazareno mines. We got the high grade at Guitarra. We got the Guitarra bulk tonnage and actually over the eastern district with Genco we had started a development ramp down on one of the deposits."

This level of understanding allows the company to fast track restart plans without conducting lengthy economic studies. Liller stated, "We don't have to put five million dollars into doing a feasibility study just to get this thing started. It's all there already."

Optimizing Production

Once production resumes, Liller highlighted plans to optimize Guitarra's output by both increasing capacity and improving recoveries. This includes evaluating the bulk tonnage deposits for lower cost underground, rather than open pit mining. The company may also institute a Merrill-Crowe leaching circuit to recover gold and silver from lower grade stockpiled material, with the potential to boost recoveries over 80% for gold and 70% for silver.

According to Liller, "With the exploration of the eastern district, there are some real jewels over there. There was one mine, El Rincon, that operated from the early 1900s to 1934 but its average grade was 6.6 grams gold and 800 and some odd grams silver. I mean that's the kind of prize we're going to be looking for."

While focused on the restart in the near term, Sierra Madre plans to subsequently undertake exploration drilling across its broader Guitarra district concessions. Liller sees significant potential to delineate additional high grade deposits to further increase production beyond the currently planned 1,000 tpd.

The Investment Thesis for Sierra Madre

With gold trading near record highs and silver prices on the rise, restarting production at Guitarra offers strong potential returns for investors at a time of surging precious metals prices.

Sierra Madre represents a unique investment opportunity for the following reasons:

• Fast-track restart utilizing existing infrastructure significantly derisks execution and reduces costs
• Proven asset with long history of successful production
• Potential to rapidly increase production and achieve economies of scale
• Exploration upside across the broader district concessions
• Accretive M&A opportunities in neighboring historic mining camps
• First Majestic's continued ownership ensures strong alignment with shareholders

In summary, Sierra Madre offers a compelling investment case as a renewed producer uniquely positioned to capitalize on buoyant gold and silver prices. With construction risks minimized through Guitarra's existing infrastructure, the company can rapidly advance the restart to begin generating cash flows within 12-18 months.

The experienced leadership team's extensive knowledge of the asset further reduces execution risk. Once the restart reaches full production, the company will be well placed to fund both optimization efforts and expanded exploration through operating cash flows.

Given these factors, Sierra Madre represents an attractive investment opportunity with a clear path to restarting profitable production at its core Guitarra mine. By moving swiftly to capitalize on current precious metals market dynamics, the company can create significant value for shareholders in both the near and long term.