Santacruz Silver's New 500-TPD Mill Frees Its Own Mines to Grow

Santacruz Silver (TSX: SCZ) has bought itself room to grow. On September 18 the company announced the acquisition of a 500-tonne-per-day (tpd) milling facility in Bolivia, and in this interview CEO Arturo Préstamo Elizondo frames it as removing a constraint that touched nearly every part of the business: San Lucas, the company's ore-sourcing unit, has been sharing milling capacity with the company's own operating mines.

## What the mill changes

San Lucas buys ore from small and artisanal miners and processes it for a margin. The host explains that its economics track the silver price rather than a conventional mine's AISC (All-In Sustaining Cost — the all-in cost of producing an ounce of metal). Until now, that ore has been milled at the company's Bolivar, Porco, and Caballo Blanco facilities. The new dedicated mill takes San Lucas out of that queue.

The effect cuts both ways. Préstamo says San Lucas produces around 4 million ounces of silver equivalent a year — output expressed as ounces of silver once by-product metals are converted at prevailing prices — and should reach roughly 4.5 million next year, growth of about 8 to 10 percent. The mines get their milling time back too. Porco gains the most, since he says it dedicates around 50 percent of its capacity to San Lucas ore.

Mine-side growth will not be immediate. The acquisition was opportunistic and not in the budget, so the Bolivian mine plans were never built around the extra capacity. Préstamo expects a clear updated plan by the end of November, with production at the three mines ramping up gradually over the following quarters.

## Growth at every operation

The mill is the headline, but the interview walks through growth at essentially every asset.

At Zimapan in Mexico, the company has drilled for 18 months with three new diamond rigs running around the clock. Préstamo says results show continuations of known veins, which should lift throughput and the head grades (the metal content of ore fed to the mill) of silver, zinc, and copper. A recent mill upgrade is also delivering better recoveries — more of the metal captured from each tonne processed. Together, he argues, that means higher production and better economics next year.

At Bolivar, dewatering — pumping out the water inflow that disrupted the mine — is on time and on budget, and Préstamo says the mine will be back on track in Q4. Silver production there is rising this quarter, and next year two high-grade silver areas, identified while the team worked around the water issue, enter production. His claim: Bolivar will come back stronger than before.

Soracaya is the nearest-term catalyst. The company is waiting on the final permit, but a decline (an inclined access tunnel) already reaches two stopes (the underground workings where ore is extracted), and Préstamo says underground equipment is arriving on site. He expects initial production of 200 to 300 tonnes per day beginning in December, building to a budgeted 700 to 800 tonnes per day by the end of next year. At full production he sees 2.5 to 3 million ounces of silver equivalent annually, mostly silver — enough, he says, to push silver's share of company revenue past 60 percent.

## The company-level picture

Guidance for this year is slightly above 10 million ounces of silver equivalent. The revenue mix surprises investors who see Santacruz as a base-metals producer: Préstamo puts silver at around 56 to 57 percent of revenue, zinc above 30 percent, and most of the remainder is copper. Strong zinc prices, he adds, are lifting cash flows from week to week.

The valuation comparison comes from the host, not the company. He sets Santacruz's roughly $1.1 billion market cap against peers: a 2.5-million-ounce producer valued above $1 billion, a 7-million-ounce producer in Northern Africa at $5 billion, and a mid-tier producer near 14 million ounces approaching $4 billion. He also cites the Silvercrest takeover at $1.7 billion on similar production and MAG Silver at more than $2 billion. Préstamo's response is that the company is undervalued, and he lists the fundamentals: no streaming, no royalties, a clean balance sheet, and a treasury closing Q3 near $140 million — roughly double the Q2 level. He also points to the September 21 graduation from the TSX Venture Exchange to the main Toronto Stock Exchange as a step toward better liquidity, index and ETF inclusion, and institutional ownership.

Acquisitions complete the growth picture. With the treasury building and no royalties or streams, Préstamo says the company can keep growing through deals it evaluates for accretion (a term for transactions that add value per share), alongside efficiency gains and the Soracaya ramp.

## How to read it

Every number here is management's claim from a company update, not an audited result. The useful checkpoints are concrete: the Soracaya permit and its December start, the updated Bolivian mine plan due by the end of November, and Q3 results that will test the claimed treasury build. The host also discloses that he is a Santacruz shareholder, which readers should weigh.