Vizsla Silver: The Path Forward at Panuco

0:05Music

0:18Alright, wrapping up our second day here at the Beaver Creek Precious Metal Summit and it's an important one. It's been a long time and for good reason that we are finally welcoming back in Mr. Michael Connert, CEO of Vizla Silver. They do trade on the TSX and the NYSE with VZLA. Mike, it's a pleasure to have you back on the podcast. Welcome back. Trevor, I'm very happy to be here. Thank you for having me. It's been too long and I'm glad to catch up with you. It's been a challenging year, I guess you could say. It has been. I did sit in on your presentation this morning. I believe, was this the first time you presented to an event since the spring?

0:58It is. Yeah, it is. How'd it go? I thought it went well. I was in there. Yeah, well, you were in the crowd. I was in the crowd. You know, it felt good. It felt good to be out there talking to the investment community again. And, you know, I think it was also an important opportunity just to open it up, talking about the incident and, you know, the results of that with our team, in the sense that we're grieving as a team, but we've also been very impressed, and maybe impressed isn't the right word, but the strength and the resilience of the team and the community as we move forward, as we put focus on supporting the families.

1:44In any tragic event, there's glimmers of positivity, And I think that's, you know, one aspect of it. But, you know, very difficult time for all of us at Visa Silver. And having talked to many shareholders throughout this week so far, I think a very difficult time for shareholders. Not in a financial sense, but there's a sense of, you know, involvement or alignment with what we're doing as shareholders. And I think, you know, a lot of them felt that tragedy as well. So I guess what I'm saying is that there was a great deal of support, and we've been very fortunate to have that as piece of silver.

2:30Yeah. I don't want to rehash what happened. I do want to talk about kind of the resiliency you and your team learned through all this. Nothing could prepare you for what had happened. And I'm just kind of curious what, obviously the rocks, Panuco hasn't changed, right? But a few things that dynamically of how the company functions probably has changed. What needed to be put in place moving forward to kind of move on and just have security that this type of thing will be mitigated from ever happening again? Yeah, I think if we're speaking about the project and moving the project forward, that's certainly something I'll expand on here.

3:13But I think for us as a company, it's also important just to find the right ways to support the families and support the communities and to work as we have been from the very start with the relevant authority. So that's top of mind for us, of course. And as a result, we're in the process of establishing a foundation to support the families. I think that's going to be something we can talk about a little bit more in the future, but something that's really important for us as well. So there's that aspect. And then there's the actual practical aspect of how do we get back to work safely? How do we ensure something like this never happens again?

3:53And I think it's important to understand the backdrop of Mexico when that was happening and when that happened earlier in the year. It was a backdrop of fairly extreme cartel violence. You know, not necessarily entirely preceding the event, but the event onwards and around the same time of the event was, you know, kind of an extreme level there. So that is to say that, you know, as Mexico continues to do what they're doing, which is intervene with the military, and they've been doing a great job with that, specifically in the region that we're in since January. You know, we believe that there is visibility on a more stable environment there.

4:42But regardless of the exterior environment, we want to ensure that the project is very much secure. And the way that you do that in Mexico often, most commonly, has to do with involving the Mexican military in some degree. and then also having the availability to involve the National Guard and some other levels of federally available military-slash-law enforcement. And without going into too many of the details, and I think listeners will be comfortable with the idea that we can't explain all the intricate details of a security plan publicly, the cooperation and collaboration that we've been fortunate enough to enjoy with the Mexican military has been excellent.

5:27and I see that being really quite important to how we move forward. In fact, I think that we'll be in a position where we're back on site. I think it's highly likely that we'll be back on site towards the end of year. So what has been happening on site since the incident? Has it been just quiet? I mean, the work has continued, but has that been more back office work, anything that's been going on on Panuka? It is. let's say it's off-site work, but that work was actually a critical path. You know, it's actually funny. The test mine that we're developing there really is an added benefit. It allows us to get the single-heading development out of the way early, but it was never a critical path for us to do that.

6:15Typically what would happen in other mines is that they would build the underground simultaneous to building the above-ground milling infrastructure, tailings, etc. In our case, we were doing that as an advantage, a head start, let's say. So it was never a critical path. The critical path items really ran through work that we're doing in other places in Mexico with consultants, but also in our Vancouver office with the incredible technical team that we have there. So we've achieved, we're beyond 50 % of detailed engineering. Now we're looking at how pipes fit and small things. but the big engineering is done in line with the feasibility study, so that's excellent.

7:03We've done almost$200 million of contract assignments already with awardings, I should say, with M3. Of course, it's running our EPCM. And FL Schmidt, who's running, we've engaged to provide equipment. And we've actually sent orders for some of the long lead items. So we've made excellent progress throughout this period of time. And it would all have happened without being on site. So all those things are on schedule. We did have a shift in First Silver. Originally, we talked basically about the end of 2027. And that timeline was really predicated on a certain permitting timeline. There was a period of time in Mexico, not recently, but towards the beginning of the year and the end of last year, where permits were slow, let's say.

8:00And then all of a sudden, quite recently, and I think in the backdrop of trade negotiations and critical minerals and things like that, we've seen completely freeing up of the permit pipeline where countless water permits and smaller permits have been granted, but also I think well over half a dozen full MIAs have been granted as well. So that permitting, let's say delay, but it was a broader delay. It wasn't project-specific to us. caused that start date for silver, I should say, to be pushed to about the half point of the second half of 2028. Can you kind of think about this spring when you were faced with so many challenges, I guess is the simplest way to put it.

9:02you're managing the security of your people, you're managing your equity in your market, and you're also managing the moving Panuco forward with kind of an unknown horizon at that moment. And, I mean, you and I have known each other for a number of years, and there's no doubt that you have such a good head on your shoulders that you could manage that. but how what did you how did you kind of stay focused do you want to know the the you know there's a lot of prayer yeah like no i mean that's if that's what it was like honestly like i'll take it like it's like because i've you know like i you know i consider you a friend and like and this is the first time you and i have actually really sat down and openly talked about everything and i'm actually generally curious me like how did you keep cool i mean it was tough it was uh i mean it's the hardest thing that that you know anyone would have to go through in this position you have to have 10 of your uh colleagues you know they they were our friends right i mean to the last time I saw a good number of them was at a Christmas party several weeks prior, you know, I guess some weeks prior, you know, so there's that personal component where you're mourning, you know, your friends and, you know, but it's such a senseless and incredible, you know, tragic event that, that, you know, you have to, you have to compartmentalize that, I suppose, and just focus on the well-being of your staff, taking care of families.

10:51That's an incredibly difficult part of that as well, knowing that there's families that are gravely affected. It certainly wasn't caused by feesless silver, but you need to find ways to take care of those people affected. So that was a huge part of it. For a long time as well, it was crisis management where we didn't really know what was happening for weeks. We had reports, we were talking to all the relevant authorities but there wasn't a clear picture until sometime later and in that then it's multiple, almost every several hours having a crisis management team come together, you know, it's a very extreme situation to be in.

11:47You know, I think very, I'm not speaking just for myself, but for our team, you know, very, you know, trying situation, you know, on your nervous system and things like that to be in that situation and have such a high degree of uncertainty. and it's not like, oh, the share price fell and we're worried about that or we're not going to make earnings this year or something like this. It's real people, real lives and things like that.

12:21So, you know, I did the only thing I knew what to do probably during that time to manage it was a lot of praying, really. Yeah. Did you? You know, we're kind of getting, I suppose, to the other side of it. But, you know, the optimism that we have and the team's engagement, again, that resilience, you know, we're all focused on the next steps. And we feel very comfortable that we can go back to work now and return. Yeah. No, and I think so. It definitely kind of feels like it's making the turn to be behind you in all things moving forward. You know, over the years, the last five years, I mean, you bootstrapped this whole thing.

12:59You bootstrapped Canuko. and was there ever a thought in your mind this is my last question then we'll move on was there ever a thought in mind Mike that maybe this is where the dream ends or were you so resilient like this is not where the dream ends this is just a really bad thing that we have to manage and get through well I don't know that I I was never willing to give up during that time. You never have given up. Yeah. Yeah. Well, you know, there's so many trials and difficult situations when you're trying to do something that's, you know, as big as a vision that we have is for the company.

13:49So, you know, it wasn't really an option. And, you know, it wasn't thinking about that so much throughout the period. It was more about just managing the day-to-day and making sure that the focus was put on the right things at the right time. And I'll be honest, not all of it was perfectly done. We were just in the state of crisis management, but you do the best you can at that time. So any thoughts on the viability of the project came far after. and with secondary thoughts to just ensuring everything was managed right in the first place. Now, I'd have to say that we're still adamant that we're not selling Panuco.

14:43We're not selling Vizla, I should say. What we see as the vision here is a platform that not only... We're at an investment conference. people think about the monetary side of it and the monetary return for shareholders. And of course, I'm a shareholder, you know, can be exponential from here, I believe. But, you know, it kind of gives us a deeper mission to, to, you know, build a platform that brings stability to that region, brings prosperity to Mexico and solve some alternatives for people that are, you know, children that are growing up there. some of their only options are to join a cartel perhaps or things like that.

15:29It would be much better if they learned how to be a heavy equipment operator or work in some other side of the mine and contribute to society. And I think that's really what's clear to me is that this mine can do that. But it's not going to do that for 10 years. It's going to do it for 100 years into the future. So it's a bigger, more important mission in some ways as well. But I think that totally aligns with value creation as well. Yeah, much stronger Vizsla, much stronger community through all this. You know, I think one of the things, obviously the news kept kind of coming over the last number of months.

16:09And I think the one headline that actually kind of maybe put me to ease, if I may, through the whole thing, that it made me feel like we're making the transition, we're back to moving forward, was actually the working capital facility from the Mexican government financial institution. How significant is having that domestic institutional support in the broader conversation of PANUCO going forward? Well, we were very pleased to have that, and it's something that we were working on for quite some time prior to the whole year of 2025. And I think that was a great endorsement and signified the alignment and partnership between Panuco, the relevance of the project to Mexico.

17:00And the more and more that we proceed with the project, we understand the importance to Mexico. It's going to be the largest contributor to the added silver supply for mines that are coming online. That's very important to the administration in Mexico right now. And I think having these ties to FIFOMI, which is the federal investment arm for mining of the federal government, is an excellent outcome. I think it's possible that we may find other state-backed entities to create a financial alignment with like that. But I think any more that we do would be just further strengthening of those bonds, which I think is really important to the future.

17:46Yeah. You did, in this morning's presentation, you did put up the numbers from the feasibility study, which you guys published. It was back late last fall. Yeah, November. And I'm sitting back. I'm in the back of the room because I had to make an early exit. and he put up the slide and I looked over to my friend Ryan who was right next to me and was like, I forgot how bonkers those numbers are. Yeah, they're crazy. It's an incredible, I mean, it's a world-class deposit. What do those numbers look like at current prices here? Well, the stated MPV was$1.8 billion and 111 % IRR against a$240 million capex in a seven-month payback period.

18:33You know, the best we could do on the slide was, you know, a 50 % increase to metal prices, which I think had$53 silver and$4 ,600 gold. And that had basically a doubling of the MPV and 165 % IRR. Payback would be in, you could almost count it in days, you know. It would be certainly less than seven months. So it's the most robust silver project that I've ever seen. I've studied all the great ones over modern history. I've always had kind of a passion for that. And I just can't remember seeing anything that was so profitable. And that's really just driven by that Coppola vein being so wide, so thick and long and so high grade.

19:21And then, of course, the portal that we've developed only went down, you know, I think it was less than 100 meters to get into that vertical depth. So it's very near surface. And that's just, you know, the very start of it all. So, yeah, those feasibility numbers are crazy. It's got almost an eight times MPB to CapEx ratio at those stated prices of$30 silver and$3 ,100 gold. So it's mind-boggling. It's still, what, 10 % of the entire Panucca land package? Of the original property, yeah. Yeah, yeah. So it's 10 % of those original veins, less actually, of those original veins. But then we quadrupled the land package.

20:01Yeah. And so it's probably like 1%. Unbelievable. Unbelievable. You have enough working capital. I mean, you could make a final investment decision tomorrow, Mike, if you really wanted to. What needs to happen? What hurdles need to get done for you to finally just say, we're moving on, we're building this thing? It really has to do with the operating permits. So the MIA, which is based on the environmental impact assessment that we've provided to the government. That's the keystone permit that we expect imminently to be granted. Then there's the change of land use, which is basically changing.

20:39You can think of it as zoning, changing from agriculture or whatever it might be in Mexico to mining. Are you going to plan any more allocation to exploration? Oh, yeah. Yeah? Yeah, yeah. Okay, you're actually really excited about this. Very much so. Yeah. I mean, it's, well, you know, I was involved in, you know, led the initial consolidation. and I'm not a geologist but as I said I'd love to study these districts in Mexico and you know you think of something like San Dimas these veins they've been producing over 100 years of commercial production history and Fresnillo multiple hundreds of years of production history you know and so I was really engaged in really focused on consolidating more of the land package because I think this is a completely overlooked district and has all the earmarks of these greats in Mexico.

21:45And, you know, we're not seeing anywhere near the amount of value that I think can be surfaced with a broader-scale regional exploration. And that's one thing, the broad-scale regional exploration. But then there's exploration that has to do around Copala. In fact, there's about 42 million ounces of silver equivalent that could be converted early in the mine life within the first five years. And it's all inferred that it can be converted to indicated if we just tighten the drill spacing. Last time we did that, we actually, on infill, increased the ounces and increased the grade. That typically doesn't happen.

22:20So we look at this as super low-hanging fruit, and something that actually means a lot to the economics can improve the economics further. Once we get back to site, which I think is soon, and drill from underground at those two drill bays that we installed right before we left the site in January. So there's kind of two phases. That's the underground drilling plus some on-surface near mine exploration. There's probably 10 kilometers of veins there. Some of them have inferred resources that aren't in the mine plan that could very easily be converted and added to the mine plan. And then some other nearby veins that I think have a huge amount of opportunity too.

23:00In fact, there's just so much there. It's three-day for us. Any blue sky potential? Like take a stab and add another new story to Panucco? Yeah, yeah, that's what I think. I suspect, you know, this is my opinion. It's, you know, all the disclaimers, et cetera. But I think there's probably a better part of half a billion ounces, maybe more, just in that center of mass we have on the west. And that's a third of the property portfolio there, of the main property. and then in the center district we drilled six meters of a kilo before the end of the year last year still have to follow up there that's where the historic mining occurred and there's you know i i think that eventually just that original property package is going to have you know billion ounce plus potential certainly and you know the other thing is even on copalis it's completely open in all directions except for at surface because we you know it's basically at surface.

23:56So, you know, it's one of these things, you think back to some of the big veins that had empowered these mega districts in Mexico and had has all the hallmarks of that, you know, I think Copala in the fullness of time will probably be a 20 or 30 year mine life versus the, you know, 9.4 that we have to start. But again, when you have 111 % IRR and, you know, seven month payback on what you drilled so far, you just start to build the mine, right? That was at$35 silver. At$35 silver, yeah. So you just got to pick up one and say, okay, this is a good start. But no, that's why we can't sell this. It's just too good.

24:35And there's other silver companies out there where the leaders behind those companies spent 15 or 20 years putting together smaller assets so that they can go after and have the market cap and the financial ability to go acquire these types of projects that we have at Panucco. Fortunately, we got it project number one. It's an incredible cornerstone that you could build one of the world's largest silver companies out of. The quick math is if you look at$12 ASIC, which is being conservative, and 20 million ounces in those first five years, the first five years of cash flow is nearing a billion dollars.

25:18So it's just ridiculous, which coincidentally is actually what our enterprise value is close to now, which tells you how cheap we are. So it's, yeah, I don't know. We feel so fortunate that we found this thing, and there's just so much more there to see. You did add some key personnel to the team recently. He brought in a senior Mexican operating government relations person, exploration. Essentially, a management team that will carry Panuco into construction. And beyond. And beyond. Yeah. So, you know, one of the interesting ones, and, you know, this one took a bit of perhaps explaining to, most people understood, but, you know, some people had some questions about it, was Luis Lazaro, who's, you know, not necessarily a mining background.

26:04He's an engineer. He worked for CEMEX in the past. He's an MBA, but he spent 30 years basically running as a deeply experienced corporate executive Mexican businesses, most of those owned by very wealthy Mexican families, and they'd be multi-billion dollar businesses doing incredible revenue. And that's where his role was prior to, which kind of took him a little bit out of retirement. He's young, but he was running Mexico's largest citrus business, which had operations in Sinaloa, among other challenging places in Mexico.

26:40and it's agriculture, it's mother nature, you have to deal with the unknowns. But what his pedigree is is just incredible leadership and management. We have such a strong team. Fernando Martinez is kind of the leading technical person at the project. I should say in Mexico, but he oversees a number of aspects of the project. He's worked at Agnico and First Majestic and Silvercrest. You know, he's proven many, many times over, you know, his abilities to run a mine, be a GM at a mine. And, you know, we didn't want to bring in someone technical for that leadership role in Mexico and have them supplant.

27:21You know, we're already a team that's been there for seven years, six years, works very well together. But we wanted to get the best out of them and remove the obstacles in their path. And Luis was a key part of that. And he's fit in like a hand in a glove. We've done a number of team buildings with him involved now. The team really looks up to him and appreciates his management style, so we really like that.

27:49Diego Gomez, our vice president of government relations, an excellent person. He has worked throughout the various kind of mining-related bureaucracies in Mexico. So FIFOMI, where we received that working capital facility, and then Semernat as well. And his connections are excellent. He knows everybody. He knows all the relevant people in politics in Mexico, all the way up. And he's been excellent. I've been loving working with Diego. We actually hired one that we don't talk about as much, but Susie Horna is our corporate secretary. She came from First Majestic, and she was part of the Gatos acquisition.

28:33Okay. Guillermo Hernandez, who's our vice president of exploration, he was working at Lundingold. He's worked at Luca and Gold Resource in Mexico. And I spent some time with him a few weeks ago in Mexico City, and he spent this whole time that we haven't been at site. He's been looking at the 400 kilometers of drilling that we've done, all the ranked and prioritized targets that we looked at. And it kind of reminds me of when we first made the discovery of Napoleon. We had a shutdown due to COVID, and we had a time to look at all this stuff. I remember that, actually. Yeah. We went back and we drilled the hole that changed everything, eight meters at two kilos.

29:19So I suspect that this could be similar here. He's done a great amount of work. You know, as we, Dave D 'Antonio, we hired him. He left K92 and came to join us. He's, you know, he's had so much success. He totally understands underground mining. He's, you know, he's a great addition. He's actually here at the conference with us, you know, meeting investors. And that's been great. And there's, you know, many more that aren't publicly announced, but we've added to the team. And the team is now, and, you know, It's not like we weren't before, but the team is now the one that will take us through construction and we'll be there to deliver as we're in production as well.

30:05What remains the biggest remaining risk between Panuco today and the team putting it back into, not back, but starting construction? Well, if we were a typical company, it would be financing. You'd have to say, oh, we've got to raise my own stuff. So that's a check. That's a check. You know, the thing that weighs on my mind, let's say, or that I really want to make sure, we all want to make sure we get right is a return to work. So we're the only company in Sinaloa that isn't at work right now. Torx is drilling to the north of us. GR Silver's at the project. Our good friend Daniel Rodriguez, who we made the investment into Mercado, is exploring in Sinaloa.

30:53Now, I won't say, you know, any specifics, but, you know, I've heard of CEOs of big companies that have assets in Sinaloa, you know, driving by themselves to get to the project, that type of thing. So, you know, we're doing, you know, we want to approach the return to work out of an abundance of caution, making sure that we do it right. But, you know, that's a big thing, right? Once we move past that. Of course. will be, you know, that'll be a big milestone for us. Will that be like a news release, an announcement? No, I think, you know, what you might see is, you know, news from site in the sense that, oh, drilling's restarted at drill bay 1 and 2 underground or, you know, test mine, you know, starts to stockpile Coppola, you know, things like Coppola's or that type of thing.

31:44And then the other, you know, I wouldn't say it's not a risk because it's something that every company has to do. And, you know, we feel like we've moved through this period here and the process well with permitting. But, you know, that's the big obstacle. But we're feeling very encouraged by the, well, there's a couple of things. Kind of the broader sentiment shift in Mexico towards positivity in mining. And, you know, I would say our interactions as well have been very positive. So I really don't want to be in a situation, and we've always endeavored not to do this as a company, to over-promise and then never deliver on these promises.

32:25So I don't want to say, oh, it's coming X, Y, Z date. But I think we feel quite comfortable that it could come towards the end of the year, and certainly in January, or I should say Q1 of next year. So it's something that's out of our hands, of course. but I think that'll be one of the happiest days of our collective, you know, Vizsla team's life is to receive that permit and be able to break ground and move forward. But, you know, we're extremely optimistic as a group, and I think that speaks to that resilience that I was talking to earlier. Absolutely. Mike, I'm going to leave it at that. It's a long conversation, but one that needed to happen.

33:06You have been missed, but you and the team have also been in our thoughts, and specifically mine, if I may say so. And I can't thank you enough for allowing me to be a platform to have this follow-up conversation. I think a lot of people are going to kind of be tuning in and kind of glad we did it. Yeah, well, it's my pleasure, and it feels good to be back chatting with you. We've missed you too. Man, all right. VZLA, that's what they're traded on, the TSX and NYSE. They have been a longtime partner of the podcast. I am a shareholder of the Visa Silver Company, and we will continue to do more follow-up updates with the team.

33:50It sounds like there might be some potential really important news on the horizon through the rest of the year. Mike Connick, thanks so much for your time. Thank you very much, Trevor.

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