Sierra Madre: La Guitarra Turns the Corner as Expansion Accelerates

0:18Mining Stock Daily: Moving right along, welcome back in here to Beaver Creek Precious Metals Summit. attempting to wrap up the first day here of the 2026 summit. And we are going to head down to Mexico with Sierra Madre Gold and Silver. They trade on the Venture Exchange with the symbol SM and on the OTCQX with SMDRF. It's a long overdue update here with Mr. Alex Langer, CEO of the company. So, Alex, good to see you. Welcome back to Colorado. How have the meetings been for a freshly produced, a new producer, relatively speaking? Yeah, thanks for having me, Trevor. Always a pleasure to be here. It's been great. It's been nonstop.

0:58I think we got 47 meetings. You know, buy side, analysts, some new institutions, some bigger institutions, lots of shareholders. It's been great. Obviously, you know, these metal prices, everyone's walking around with a smile on the face. Yeah. It's a good thing. But yeah, we've been busy. yeah this is probably the best one they've ever had

1:17Mining Stock Daily: yeah I was actually people are asking me about the mood here I would actually say like people are smiling it doesn't feel as at least to me it doesn't feel as jubilant as it was last year last year it felt very jubilant I don't necessarily feel that this year it's almost like we're like we're happy but it's more like a cautious if you're a producer you're pretty happy yeah you're smiling you're smiling alright let's talk about let's talk about production listen newest development It's a little bit of a mundane headline, but it's also really important. You finally got the backup generators running at Loggatara.

1:53Mining Stock Daily: How much production have those grid interruptions actually cost you this year? This year it was fairly significant. The year before was much worse. But you're looking at, from the beginning of the year until now, it was a few hundred hours. So the ability to turn these things on with a little power outage and these things are on within 10 minutes allow us to continue to push through that. So it'll bring down our costs for sure, one thing. We're pretty excited. It took a little bit longer to get them in than I had planned, but they're in, they're operational, and everyone seems pretty happy, except there is a big red button on it.

2:30I've heard it's been pushed more than once.

2:32Mining Stock Daily: Uh-oh.

2:35Mining Stock Daily: Well, diesel's not cheap. How much is this kind of cutting into your costs? Yeah, it's more expensive than the grid. However, diesel in Mexico is subsidized, and it's not, you know, the amount of profit we generate having the mills operational compared to the little bit extra cost in the diesel. Yeah, definitely worth keeping them on. So kind of moving forward, this thing is finally up and kind of humming. Should investors expect a noticeable improvement to throughput moving forward or operating consistency? Yeah, no, I think we've kind of turned a corner. We're very excited. If you look at the last quarter release, we hit days up to 672 tons per day.

3:12Nameplate is 500. So obviously the expansion is moving forward well. We should have news on that in the next week and a bit. But we had kind of promised, you know, a full phase one expansion getting up to 750, 800 here by the end of the quarter. And we're pretty much online. So really, really excited for that. And, you know, that'll be reflected in the quarters moving forward. Then the next phase expansion starts right away. We overbuilt the ball mill, which was great. So it took a little bit longer to get installed, a lot more cement. But it's going to allow us to have full grinding capacity for Phase 2 expansion up to that 1 ,200 to 1 ,500 ton number, which is on track for a quarter of three of next year.

3:51So 12 months away. I'm really excited.

3:54Mining Stock Daily: We'll probably have that Phase 1 expansion conversation in the next couple of weeks, I'm assuming, when the news does hit. But can you kind of walk us through what needs to happen to reach that milestone? For phase one or phase two? Phase one. Phase one, it's done. So what we did, the big thing was adding increased grinding capacity. So that's taken care of. The flotation tanks are actually good for about 1 ,500 tons per day, so that was easy. The other big thing was the crushing capacity. So we installed a new cone crusher actually in January. So that's been operational for quite a while. And then also a paste backfill plant, and that's pretty much up and running as well.

4:33So we did a bunch of things. We also built a large thickener, which will be for Phase 2 expansion. That is really a big thing there. What we need to do is start construction of a fully permitted 5.7 million ton dry stack tailings facility. So if the canure is complete, we'll start construction on that tailings impoundment in October. So we've picked a contractor. We have a new project manager for that. Once that's operational, that's when we can move into much higher throughput levels. and that'll get us a$1 ,200 to$1 ,500, and that's probably the right number for Logitar.

5:07Mining Stock Daily: Okay, so you've done a lot of work that bridges that gap from phase one to phase two, that accommodates phase two. The larger mill originally planned, that helps with phase two, absolutely. Talk about the execution risk as you start planning the next phase. Yeah, that's obviously key is making sure we have enough material to feed this thing, right? And you're going for$500 and hopefully tripling production. It's a lot more coming out of the mines. But a couple of things we do have. We do have three producing centers. So, Guitara, Colosso, Nazareno. When we started production at 500 tons per day, we were just at Guitara.

5:43So, very comfortable getting 500 tons per day from Guitara at a minimum. I expect that to be more. Colosso is where First Majestic was last mining. They were getting 500 tons per day just from Colosso. And then we also have Nazareno. And we also have the Los Angeles bulk tonnage deposit underground. ground. We do have a couple contractors that are helping out with development in Colosso Nazareno, so it's really freed us up to focus on Katara and on Los Angeles. So, you know, it's a little bit of juggling, but pretty confident. Sequencing is now in place. We're really catching up on the development work, extra ramps, everything coming through.

6:17So, you know, we're confident we'll be able to hit that and keep it steady.

6:22Mining Stock Daily: Last thing you want to do is, you know, push through at 1 ,500 or whatever that number is and then drop down to a thousand and then 12 and no we're we're going to keep it steady as best we possibly can it is a critical moment in any underground operation right you have to have enough material to feed the mill because once you don't it seems like it just kind of falls off and we've seen this story numerous times with underground underground projects talk about what that sequencing in the mine like the mine sequencing looks like because you do you plan one week one month six months in front of you how does that mind plan kind of work yeah so we do seven years seven years yeah a really detailed mind plan is two years out we're talking shift to shift to shift to shift so we know where we want to get to it's really about opening up more working faces probably last time we chatted we were you know 16 to 18 we're well over 20 now we're gonna be at 30 by the end of the year and that's an excellent number.

7:20So if we have any issues with one face, we can move to another. Blending, we have a kind of little pilot plant we use to make sure our recoveries are good. So it's, yeah, a little bit of trial and error, especially on the recovery side. But getting that material out with what's happening with the three different production centers, I'm happy and I'm fairly confident.

7:40Mining Stock Daily: All right. Cube 2, you produced just over$8 million revenue,$1.5 million of gross profit. So as the throughput increases, as we're bound to see, where should investors expect to see the biggest operating leverage? So you're going to start to see our costs come down. I think we maxed out there in the last quarter, and we still made money. It's been great. We did take full advantage of the higher silver prices. About 50 % of all material that we've processed to date is being outside that resource. So we're building these ramps and intersecting these veins and sampling them. ah, you know, whatever, 60 grams silver, but still profitable at these prices and processing it.

8:20So we've been able to do that and we've still been able to make money. We also had a lot of extra development costs within that number. And as we catch up on the development, that number is coming down as well. Our rental fleet has been pretty much fully converted over. So we're expecting about a$5 drop per quarter for the next three quarters in terms of our costs. Okay.

8:41Mining Stock Daily: Do you expect guidance for next year to be dramatically changing? No, we can't do guidance. But I think when people start to see these next few quarters, they'll start to see where we're going to get to. You know, grades are going to go up just because we're going to be producing from the resource as opposed to development rock. Can't call it or.

9:02So you're going to see a lot of things coming together, and we're very excited.

9:07Mining Stock Daily: Okay. I do want to talk to you about Del Toro. Sure. The original plan, use the cash flow from La Guitara, works with the development of Del Toro. Obviously, with the hiccups with La Guitara, do we need to settle the expectations with the development of Del Toro? Has it been held back a little bit at all? Not at all, no. So in terms of Guitara, we're weeks behind. It's not months or anything like that. Okay. And even with the throughput at 670, our goal was 700, so we weren't far off. That's for sure. And we'll catch up on that. Just quickly on guitar before we move to Del Toro. We have that 30 ,000-meter drilling campaign starting in October.

9:48So finally, finally. This is why we bought the mine. We've never been so excited to show what we have. So we're starting with these very long horizontal holes. We're actually getting the drill rig built as we speak. They're going to be over a kilometer long. It's really big, thick diameter holes, bigger than HQ. queue we're going to intersect a lot of underground workings i think we figured out the right elevation uh there's a chance we can intersect you know 40 different vein systems from these holes and then from there we'll add a couple uh surface drills some diamond drills we'll shoot down we also have our own underground drill rig so we'll be shooting there so 30 000 meters and as a profit to hopefully increase we can always increase that program so that's truly

10:32Mining Stock Daily: what i'm most excited for oh very cool a kilometer horizontal hole 13 of them wow Yeah, it's wild. That's super cool. It is really cool. I've actually never even heard of that. Yeah, I know. We had to get the drill built specifically for what we wanted. And we've used these contractors before at our Topic project and previous mining companies I worked with at Prime Mining as well. So they're amazing. And it's being built as we speak and should start turning in October. You know, it'll take a while because these holes are big. But hopefully we can get each hole out in, you know, seven to ten days would be ideal.

11:05Maybe it takes a little bit longer. Sure.

11:06Mining Stock Daily: What are the targets? So the targets are kind of all the old veins and working. So I mean, in Agua, El Rincon, Santa Ana, I think we've identified, yeah, about 40 different veins that we want to intersect. If you go to our website, you'll be able to see some of the imagery of some of the modeled veins that we have from underground as well as surface. It was also in that press release where we announced we have the drill permits in place. But we'll share that better next time. It might be ideal once that drill starts turning to get Greg on. I've never seen him so excited. I've known him for a long time.

11:42So, yeah. That's awesome. So definitely do that.

11:46Mining Stock Daily: Okay. So that's Katara. Now we can move to Del Toro. Okay, yeah. Let's do talk about Del Toro. What do we learn about Del Toro? A ton. So now we've had it for two months-ish, and nothing's changed in terms of the plan. A little bit, actually, I should say. So the plan there was to relog all the drill holes. Obviously, First Majestu did a great job of drilling. And so for us, we're just redoing our database, building that up, as well as mapping. So mapping has gone really, really well. It's quite a bit smaller than La Guitara. It's only 4 ,000 hectares, where Guitara is closer to 30. So mapping took a little bit quicker, to say the least.

12:21So we're mapping in the underground. We're about to fly some geophysics and some mag. We think that's going to help as well. But we're starting to see tons of different mineralization at surface, whether it's these chimneys, mantos, different SCAR deposits, CRDs. So there, the plan is to drill 30 ,000 meters, actually, you know, next summer in 2027. Things are going quite well. Maybe that's moved up. We'll see what we do there. But about 15 ,000 meters will be for the former production areas, which are these mid-sulfidation vein systems in three production centers. And then the other 15 ,000 meters will be for pure exploration.

12:59And we're elephant hunting. so it's it's the boys are even more excited than when we acquired the mine uh you know lots of work and still building that up but uh we're excited so really is del toro is

13:10Mining Stock Daily: really a development type story with potential restart but what did do we expect the the typical kind of checklist to get to a restart decision no we're we're fortunate uh you know similar to what we did a la guitar we got it for two years for production we turn it on 11 months later We see something that we could do similar there when the time is right. Like we're full on Agatara. We don't want to, you know, trot before we light jog or whatever. So we are going to be pragmatic in what we do in the exploration approach. So proper exploration. Goal is to come up with a resource at that point and then decide what it would take to make sense to turn it on and at what level.

13:55You know, budget to turn that thing on is roughly 10 million U.S. So again, not a huge capital outlay.

14:00Mining Stock Daily: Yeah, yeah, absolutely. Okay. Any potential of putting another asset into the portfolio? Always nothing imminent. I'm looking all the time. The price is getting more expensive? Actually, things have kind of become a bit more reasonable. Have they? Yeah. Why is that? I don't know. You know, production's hard. Yeah, yeah. You know, finding the right capital can be hard. So some of these deposits we're interested in, or, you know, they're there, whether it's, you know, another pub co or housing a major or family run, you know, pricing is, you know, becoming a bit more reasonable. Definitely nothing imminent, but lots that we're excited.

14:39And, you know, if I needed to move on something within a week, we could do that. I'd rather not. I'd rather it be when we're ready once, you know, I expect to get hopefully some new re-rating, you know, within the share price as, you know, production increases as our quarters come out. and hopefully the drilling excites a few people. So, yeah, if something happened tomorrow, we'd be ready, but I'd love to push it a little bit further.

15:05Mining Stock Daily: Okay. Let's touch base the next couple of weeks. When phase one concludes, you begin phase two right away. That will be an important conversation, Alex. I look forward to it. This has been one conversation long overdue, but I'm glad we could get it done here in Beaver Creek. Have a great rest of your week. I'm sure you only have about 70 ,000 more meetings to go. Many thanks, Trevor. Sierra, moderate, gold, and silver. They do trade on the TSX with the Sybil SM.

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