Turnaround Team Tripling Silver Output in North America?

• New management team aims to replicate past success in mining turnarounds
• Focus on optimizing operations at the high-potential Galena Complex silver mine to increase production from ~365 to 1000-1200 tons per day
• Recent strategic moves include consolidating 100% ownership of Galena, raising $50M in equity, restructuring debt, and strengthening leadership
• Galena has produced 5M oz AgEq historically with significant infrastructure in place; additional upside from copper and antimony byproducts
• Cosalá Operations in Mexico are already generating positive cashflow to fund growth

Building the Next American Silver-Focused Turnaround Story

Americas Gold and Silver Corporation (TSX: USA) (NYSE American: USAS) is undergoing a major transformation. With a new leadership team in place, the precious metals miner is moving rapidly to turn around operations, particularly at its flagship Galena Complex silver mine in Idaho.

As Chairman and CEO Paul Huet explains, the past month has been a whirlwind of activity:

"We've been at the helm here 28 days today. So just under a month for the team, and I'm very, very proud. In less than a month, we've managed to accomplish a lot. We've been moving at stellar speeds here."

Key developments include:

• Consolidating 100% ownership of the Galena Complex (previously 60% owned)
• Raising $50 million in equity
• Restructuring debt
• Assembling a new leadership team and board of directors

The company's new leadership, including Huet and Oliver Turner, have a proven track record of successful mining turnarounds. Huet was previously the CEO of Klondex Mines and more recently led a remarkable turnaround (along with Turner) at Karora Resources, where he and the team increased gold production fivefold from 25,000 to almost 200,000 ounces per year. The company was sold to ASX listed Westgold Resources in August 2024 for $1.3bn, making them the largest unhedged gold producer in Australia. Now, they aim to replicate that success at Americas Gold and Silver.

Interview with Chairman & CEO, Paul Huet, and Oliver Turner, Corporate Development

Turnaround Strategy & Initial Actions

The Americas Gold and Silver turnaround is centered on the Galena Complex, a historically prolific silver mine located in Idaho's legendary Silver Valley. While Galena has struggled in recent years, Huet sees ample low-hanging fruit:

"It's mining 101. Don't complicate this. What are we doing today? We're actually getting 365 tons of ore a day. Where do we want to get to? We would like to get to a thousand to twelve hundred tons a day."

Galena has a track record of much higher production, notably outputting 5 million ounces of silver in 2002 alone. With over 55 miles of existing underground development, four production shafts, and twin processing facilities, the infrastructure is in place to drive a significant increase in output.

Oliver Turner, Corporate Development, elaborates on some of the operational improvements underway:

"When Paul mentions us taking it up north of a thousand tons per day, those are the ways that we're going to get there. But the most important thing is to leverage what we already have. And this mine is incredibly well endowed when it comes to infrastructure."

Initiatives include optimizing underground mining methods, upgrading hoisting capacity, streamlining the mill for continuous production, and exploiting higher-grade silver-copper zones that were previously ignored due to depressed silver prices.

Challenges & Opportunities at Galena

While Galena's turnaround is now a key focus, it was previously starved of capital and leadership as Americas Gold and Silver directed attention elsewhere. Notably, the company sunk over $100 million into the struggling Relief Canyon gold mine in Nevada, which has since been put on care and maintenance.

Huet doesn't mince words:

"The focus of the management team, you can imagine, were laser-like focused on getting that gold mine up and running and it was going to become the savior. It was going to fund the rest of the company...Unfortunately, when that failed you found yourself in a situation where, well, we starved the other projects for capital, and there wasn't strong enough leadership."

Now, with Relief Canyon sidelined, Galena is getting the attention it deserves. Beyond the "pure" silver opportunity, the mine offers compelling upside in the form of by-product metals. Notably, it is the only current US producer of antimony, a critical mineral used in electronics and ammunition. Preliminary estimates by Huet suggest the mine has produced over 15 million pounds of antimony worth $240 million at current prices - all previously shipped without any payability:

"We've got guys all around us, every mine around us have got $150 million of debt secured...Everybody around us who is coming online - they've got great assets, but they're coming online, we're actually there and we're producing it."

Galena is also a meaningful producer of copper, which again the company has not optimized payability on:

"We don't get paid for our copper. That is going to stop - we have to get paid for our copper."

While still in the early innings, monetizing Galena's antimony and copper output could contribute significant cash flow on top of the silver opportunity.

Operational Plans & Future Projections

Looking ahead, Americas Gold and Silver is laser-focused on executing its operational turnaround at Galena. Near-term plans include guiding on 2025 production and cost targets by the end of Q1, underpinned by ongoing optimization studies on mining, hoisting and milling.

Turner outlines the medium-term potential:

"Once we've got those firm answers and we know what our capital plan is, phase one is going to be 2025 - what are we going to be doing this year. And then we'll start talking about growth in the years after that. One of the things that we had, which was a huge asset for us at Karora, was a great following from analysts on the streets. So we're going to be ramping up research coverage and those analysts will start to put out numbers in terms of what they see in the growth plan over the coming years. We're going to have more that we can talk about. We're going to do it in a disciplined way and we're going to set targets and objectives that we know we can deliver on."

Financial Strategy & Asset Management

After raising $50 million in equity and nearing completion of a debt refinancing, Americas Gold & Silver has significantly strengthened its balance sheet. CEO Huet stresses the importance of "living within cash flow" going forward.

Another source of internal funding is the Cosalá Operations in Mexico, which are already generating positive free cash flow. Huet highlights the quality of the asset and team:

"Mexico generates free cash flow in the company and that helps us so we can focus and deploy our efforts to Galena while our team in Mexico are doing what they do best...Our Mexican asset is a true gem."

Cosalá is expected to generate over $20 million in free cash flow this year, helping fund growth initiatives.

Investment Thesis for Americas Gold & Silver

• High-potential silver asset in Galena Complex with past production of 5Moz Ag and significant infrastructure
• Proven new leadership team aggressively optimizing operations to drive a 3x increase in throughput
• Strategic moves to consolidate 100% ownership, strengthen balance sheet, and focus on operational excellence
• Compelling upside in silver, copper and antimony exposure, with potential to monetize by-product metals
• Fully-funded by internal cash flow from optimized Cosalá Operations

While still in the early chapters, the Americas Gold & Silver story is moving rapidly. With proven leadership, a robust turnaround plan, and significant operational upside, the company appears well-positioned to create value for shareholders in the months and years ahead. As Huet concludes:

"Look, I'll say when we did our due diligence, we did it for one reason. We came here and we didn't go somewhere else. And why we kept the team together? Because we believed there was the most torque for our shareholders."

Ultimately, as the company delivers on its operational targets, continues to strengthen its financial position, and advances key value drivers such as copper and antimony payability, the market is likely to take notice. If Paul Huet, Oliver Turner of Karora Resources, and the rest of the Americas Gold & Silver team can replicate even a fraction of their past turnaround success, investors could be handsomely rewarded.

The Silver Macro Thematic

The outlook for silver prices will be a key driver for Americas Gold & Silver and its peers. Fortunately, the macro setup for silver appears constructive.

After a multi-year bear market, silver prices have rebounded meaningfully since the covid crisis, rising from under $15/oz to over $20/oz today. Many analysts are now calling for a new bull market in precious metals, driven by persistently high inflation, a weakening US dollar, and rising geopolitical tensions.

Silver also has the added kicker of green energy demand. The metal is a critical component in solar panels, electric vehicles and other clean technologies. As the world accelerates its energy transition, this could provide a secular demand driver for silver.

For Americas Gold and Silver, a rising silver price would provide a substantial tailwind. Every $1/oz increase in the silver price translates to an additional ~$15 million in potential revenue based on the company's current resource base. As Galena scales up production and Cosalá optimizes its silver output, the company's leverage to the silver price will only increase.

In conclusion, Americas Gold and Silver offers investors a differentiated opportunity in the silver sector. With a proven leadership team, high-quality assets and multiple avenues for value creation, the company is well-positioned regardless of the macro backdrop. But if the bull thesis for silver plays out, Americas Gold and Silver shareholders could be in store for an extra shot of torque. As CEO Paul Huet quips: "We are a silver company, full stop."

With a Galena turnaround in full swing and potential further upside from there, it's a story worth watching closely.