Prepared remarks
Welcome to the Avino Silver and Gold Mines First Quarter 2026 Financial Results Conference Call and Webcast. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may signal an operator by pressing *0.
Thank you, operator. Good morning, everyone, and welcome to our Q1 2026 earnings call and webcast. To join this webcast and conference call, there is a link in our news release of yesterday's date, which can be found on our new website under Investor Center then News and Media. In addition, a link can be found on the home page of the Avino website. The full financial statements and MD&A are now available on our website under the Investor Center tab then Reports and Financials. In addition, the full statements are available on Avino's profile on SEDAR+ and on EDGAR. Before we get started, I remind you to view our precautionary language regarding forward-looking statements and the risk factors pertaining to these statements and note that certain statements made today on this call by the management team may include forward-looking information within the meaning of applicable securities laws. Forward-looking statements are subject to known and unknown risks, uncertainties, and other factors that may cause the actual results to be materially different than those expressed by or implied by such forward-looking statements. For additional information, we refer you to our detailed cautionary note in the presentation related to this call or on our press release of yesterday's date. On the call today, we have the company's President and CEO, David Wolfin; our Chief Financial Officer, Nathan Harte; our Chief Operating Officer, Carlos Rodriguez; and our VP Technical Services, Peter Latta. I would like to remind everyone that this conference call is being recorded and will be available for replay later today. Replay information and the presentation slides from this call and webcast will be available on our website. Also, please note that all figures stated are in U.S. dollars unless otherwise noted.
Thanks, Jennifer. Good morning, everyone. Welcome to Avino's first quarter 2026 earnings call and webcast. We will cover the highlights of our financial and operating results and then provide an overview of what is coming up in the next quarter followed by a Q&A session. Once I have gone through the operational highlights and overall progress during the quarter, I will turn it over to Nathan Harte, Avino's CFO, to discuss the financial results for the period. We continue advancing along our clear path for transformational growth, evolving Avino from a single-mine operator to a diversified multi-asset mid-tier producer in Mexico. We have had a very active first quarter achieving progress across operations, development and corporate initiatives, including the completion of the 2025 drill program at La Preciosa, and welcoming Linda Brouton to our board, who has a track record in operations, sustainability, and the environment. In addition, we launched an ambitious 30,000-meter drill program across La Preciosa and Avino, and have currently drilled 2.6 thousand meters at La Preciosa and 3 thousand meters at Avino. Early in the second quarter, on April 16, we announced our inaugural mineral reserve and updated mineral resource estimates. We began 2026 with positive momentum, which is reflected in our quarterly production of just over 568 thousand silver equivalent ounces, providing a strong foundation to deliver on our annual production target. Mill performance remained solid during the quarter, with tons milled exceeding expectations. Our teams continued to actively manage throughput across all four circuits. Contributions from La Preciosa development exceeded plan, and we are seeing encouraging progress in grade improvements, particularly towards the end of the quarter. The key drivers guiding success achieved in Q1 are as follows: Firstly, financial discipline and strategic capital allocation played an important role driving meaningful improvement across key financial metrics. Record revenue of $39.4 million, cash of $139 million, and a working capital position of $140 million. Our financial strength enables us to carry out our organic growth plan with a strong balance sheet. Next, continued advancement at La Preciosa with increased tonnage processed during Q1 2026. Throughput averaged approximately 200 to 230 tons per day during the quarter resulting in more than 14 thousand tons of material processed. The completion of a new mineral reserve estimate and updated mineral resource estimate was another key driver; this was released on April 16. Establishing mineral reserves across all of our properties is a transformational milestone for Avino. For the first time, we have defined reserves that demonstrate the underlying quality, scale, and economic potential at our asset base, further advancing the company towards a multi-asset mid-tier producer. We are very pleased to report an inaugural mineral reserve estimate of 127 million silver equivalent ounces across all three assets. The milestone is complemented by growth in our mineral resource base. The growth was achieved after accounting for depletion from ongoing mining activities, underscoring the strength and continuity of our ore bodies and mineralized systems. Together, these results reinforce the depth of our organic pipeline and position Avino for continued growth and long-term value creation for shareholders. La Preciosa was an important contributor to our operational progress this quarter with strategic exploration efforts continuing successfully. The planned 2025 drill program was completed, and results were released in late January. We reported excellent silver grades from the remaining six holes, which totaled 1.4 thousand meters drilled. The entire 2025 program consisted of 14 holes for approximately 3.5 thousand meters of drilling. The silver grade continues to surprise us with significantly higher silver grades compared to the average grade in the current mineral resource. These latest holes were outside of our recent mineral resource update as the data was not received until after the cutoff period. However, we expect to encounter similar high grades as we continue with development mining on each face of the vein to the north and south of the main San Fernando ramp. La Preciosa also contributed positively to our first quarter performance through ongoing extraction, haulage and processing of development materials supporting elevated mill throughput and operational flexibility. Next, silver revenues have increased with 60% of revenue from silver production in Q1 2026, record revenues and free cash flow generation. Also during Q1, precious metal prices remained strong, supporting our operations and contributing positively to our overall financial results. Another important contributor to our continued progress is the growing recognition Avino is receiving within the institutional investment community. As we continue to execute on our transformational growth strategy, additional funds and ETFs are becoming shareholders of the company, broadening our investor base and enhancing overall market visibility. These achievements demonstrate the meaningful progress made in advancing Avino's transformational growth strategy while reinforcing the company's investment case. In addition, a key contributor to our continued success is the quality of the jurisdiction and communities in which we operate. Mexico remains an important and established mining jurisdiction and we believe our long operating history in Durango continues to demonstrate the strength of the region in which we operate. We have built strong relationships with our local communities and workforce over the decades which is reflected in our low labor turnover and growing base of skilled employees. Our operations contribute meaningfully to the local economy through employment, training, procurement, and community initiatives. At the same time, we remain focused on responsible mining practices and continually work to reduce our environmental footprint through initiatives such as water recycling, backfilling underground workings where appropriate, and reclaiming historic open pit areas. We believe this balanced approach to operational excellence, community engagement, and environmental stewardship supports the long-term sustainability of our operations and future growth plans. Moving to slide 6, we turn to our Q1 production results, which were released on April 23, and reflect steady operational performance. On this slide, we show our production results compared to Q1 2025 and Q4 2024, with production of 568 thousand silver equivalent ounces and 185 thousand tons of total mill feed, which is 11% higher than Q1 of last year. On slide 7, we highlight production by operation showing contributions from both Avino and La Preciosa for the year. We continue to see contribution from La Preciosa with just over 14 thousand tons during the quarter. At this time, I will hand it over to Nathan Harte, Avino's CFO, to present our record financial performance for the first quarter.
Thank you, David, and thank you to all of you for taking the time to join us as we recap our record financial and operating results for the first quarter. In the first quarter, we generated record revenues of $39.4 million with 60% of our revenues coming from the sale of silver at an average realized price of $86.42 per silver ounce. Gross profit margins were 40.59% inclusive of noncash items and 68% on a cash basis, excluding depreciation and depletion. Avino recorded its highest ever earnings for Q1 with $15.9 million in net income, or $0.09 per diluted share, beating Q1 of last year's totals of $5.6 million or $0.04 per share, as well as the previous record from the prior quarter, $10.5 million or $0.06 per share. First quarter adjusted earnings were a record $24.3 million or $0.14 per share, compared to just under $10 million or $0.07 per share in Q1 of last year and $16.3 million or $0.10 per share last quarter. Operating cash flows and free cash flow both improved compared to Q1 of last year. We generated operating cash flows before working capital adjustments of $18.7 million or $0.11 per share. Free cash flow generation was $17.2 million excluding La Preciosa development costs, which was a quarterly record. Moving to liquidity and treasury, our cash position was a record $139 million at the end of the quarter and working capital was $140 million. Avino has no secured debt other than leases on operating equipment at both the Avino and La Preciosa mining operation sites, and we are well positioned to execute on all growth options in front of us. On an operating cost basis, cash cost per payable silver equivalent ounce for Q1 was $24.46, a 16% increase compared to $21.10 in the last quarter. All-in sustaining cash costs were $34.72 for the quarter, a 10% increase from $31.59 last quarter. On a per ton basis, cash costs of $64.04 were up 7% compared to $60 per ton last quarter, and all-in cost per ton were flat compared to 2025, with both periods being right around $90. Our mine operating cash flows before taxes and margins for the quarter were significantly improved with margins at 68% and $26.7 million generated, once again demonstrating the leverage that producers have in this current price environment. In the quarter, we did see some increases in cost per ounce for a few reasons. The main reason being the addition of processing La Preciosa development material. I do want to remind everyone that this is development material running through the mill. We are in a unique position that a lot of the development from La Preciosa is in ore; it allowed us to offset some of the costs associated with development work, which we would have to do regardless. These costs for La Preciosa are not indicative of long-term cost per ounce or per ton expectations. However, at current metal prices, each ton of development material mined and processed is being done so at a meaningful profit. Another significant item to highlight is the movement in silver price which did have an impact on our silver equivalent payable ounce sold calculation, which also has an impact on our cash cost and all-in sustaining cost per ounce figures. Using the prices from our cost and production guidance we put out for 2026, our cash cost per ounce for the first quarter would have come in at $19.82, which is in line with our cost guidance of between $19 and $21 per ounce. On an all-in sustaining cost basis, silver price had a larger impact. Using the same budget prices, our all-in sustaining cost per silver equivalent payable ounce was $28.14, slightly above our cost guidance range. We do expect this to normalize back into the range as grade improves in our mine sequence in subsequent quarters. Our consolidated cash cost per ton figure of $64.04 came in below our cost guidance range for 2026, and on an all-in basis, we were just above our range at $90.80. Flipping back to the revenue side, here are the expectations for production and revenues by metal moving forward. Given the recent price movement in silver, we do expect that the silver portion as it relates to revenue will be higher than the estimated graph shown in front of you, especially as La Preciosa contributes more in the second half of the year. At this point, I will now turn it back over to David to run through our upcoming activities.
Thanks, Nathan. Moving to slide 12, as we summarize our key goals for the remainder of 2026, our focus is on strategic exploration and drilling with 15 thousand meters of drilling budgeted for both La Preciosa and Avino as mentioned earlier on this call. We also look forward to increased production of La Preciosa with a goal of 500 tons per day. As mentioned earlier, we completed an inaugural mineral reserve and updated mineral resource estimate. Collectively, our assets host proven and probable mineral reserves of 27 million tons, 127 million silver equivalent ounces at a grade of 145 grams per ton, as well as measured and indicated mineral resources totaling 67 million tons and 301 million silver equivalent ounces at a grade of 162 grams per ton, and inferred mineral resources totaling 24.8 million tons and 87.6 million silver equivalent ounces at a grade of 123 grams per ton. Avino is achieving market recognition and institutional buying, ETF inclusion, broadening our investor base. As outlined on slide 13, I'd like to highlight again the company's growth strategy. With the 20-kilometer footprint we have three key assets, including our operating mill complex, which currently processes material from Avino and La Preciosa. We have access to water, power, and tailings storage critical infrastructure that supports our ability to expand production efficiently. Our goal is to scale up production by 2029 through the contributions from our three key assets. By leveraging our existing infrastructure assets and resource base, we believe we are well positioned to execute our growth plan efficiently and effectively. We rounded out the quarter with more record-breaking financial metrics which reflects the strength of our strategy and the dedication of our team, both of which drive the success as we pursue the next phase of growth. We are focused on the future and advancing our path to transformational growth. With decades of work behind us to build this foundation, we remain disciplined in how we manage our financial strength, making thoughtful and strategic decisions to support long-term value creation. On behalf of our leadership, thank you to our entire team for your efforts and contributions. We would now like to move the call to the question and answer portion. Operator?
Questions and answers
Thank you very much. We will now begin the question and answer session. To join the question queue, you may press *1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a phone, please pick up your handset before pressing any keys. To withdraw your question, please press *2. We will pause a moment as callers join the queue. Our first question is coming from Jake Sekelsky of Alliance Global. Jake, your line is live.
Hi, David, Nathan, and team. Thanks for taking my questions.
No problem, Jake.
So just looking at cost, I mean, obviously, we saw a record realized silver price during the quarter. Nathan, you touched on this a bit, but did higher prices trigger any cost pressures outside of that silver equivalent ounce calculation that you mentioned?
Hey, Jake. Good question. You might be referencing some of the pressures that are coming from royalties or other items that some other producers are facing. La Preciosa had a royalty which we repurchased last year, so no impact there. At Avino, there is a long-standing royalty, but we have been able to manage it and it does not impact us too badly; it's pretty minimal overall. I think the change maybe on a quarter basis was about $0.20 an ounce, so not overly material to our costs. On the other side, there is profit sharing in Mexico, where workers are compensated fairly and additional compensation comes with making money, so there is a bit of impact there. But again, nothing outside the normal course for us.
That is helpful. And then just on the La Preciosa ramp, any additional color on that transition from development tonnage to the higher-grade material? Do you have any targeted throughput in mind that you would like to be at by, like, year end?
Yes. Thanks, Jake. We are still targeting that 500 tons per day. It's really about doing the development to bring our cost down when it comes to production mining; just setting ourselves up for long hauling in these particular areas. That goal is still 500 tons per day to fill those two circuits. Of course, the way our mill is set up, circuits 1 and 2 do about 250 tons each more or less, with circuits 3 and 4 doing 1,000 tons. So the next step up after 500 tons would have to be 1,000 tons in order to fill one of those larger circuits.
Okay. That is all for me. Congrats on the strong quarter again.
Thank you, Jake.
Thank you very much. Our next question is coming from Heiko Ihle of H.C. Wainwright. Heiko, your line is live.
Hey, David and team. Nice to, once again, be able to raise my target price this morning. Thank you very much. There was a little paragraph in the press release about the ongoing extraction, haulage and processing of the development material, and there was a sentence that you were slightly below plan early in the quarter. Obviously, we're halfway through Q2 tomorrow. I just want to see the actual financial impact. I assume transportation expenses are slightly higher given that you have to unload and load it one extra time. Do you want to give us an idea what we should use in our model once that is no longer a factor?
Yeah, Heiko. Fair question. When silver prices did shoot up, we did process some lower-grade material. So the grade was a bit lower, though it still produced a significant profit. You will see a transition back to the grade expectations that we are looking at internally. The big transition is going to be once we switch to production mining, which should be coming in subsequent months, and the grade will significantly improve.
Fair enough. And then the drill program you called for 30 thousand meters over 3 years, with 15 thousand meters at La Preciosa and 15 thousand at Avino. You did 2.6 thousand meters in Q1. What did you do in Q2 so far, and should this essentially be a second-half weighted item in our models?
Thanks, Heiko. We are going to be able to hit the 15 thousand. We did not get started for the drilling until kind of midway through Q1, so you don't see the full quarter there. We are hiring extra geologists and increasing staff to log all the core required. We do think we are going to hit the required metrics.
We are sourcing a fifth drill; we are adding a fifth drill as well. There are currently four drills turning.
As we said in the last press release, we are adding a fifth drill.
I will build on this question. Do you want to give me a best guess for your Q2 meters?
Not at this time. We're still working through it. The rock changes every day; some days you make great progress, and other days you have issues. That's life on a drill rig.
Alright. Fair enough. I will get back in queue.
Thanks, guys.
Thank you very much. Our next question is coming from Joseph Reagor of Roth Capital Partners. Joseph, your line is live.
Hey, guys. Thanks for taking my questions, and congrats on a strong start to the year. Two accounting questions. One is depreciation: specifically for Avino, depreciation jumped. Is that a reflection of the Q4 to Q1 reserves and now accounting for depreciation over the reserve life? Or is there something else in there?
Joe, yeah, that's a fair question. It's more of a one-time thing — a significant jump — but we will have a bit higher than what you saw quarterly in 2025. There's definitely a one-time jump there from an accounting adjustment, and that's all.
Okay. And then looking at your treatment charges, they declined again as a percent of revenue in the quarter. Is there anything specific in there one-time, or is this just high demand for silver ore from smelters leading to lower charges for you guys?
Yes, they went down both in total dollars and as a percentage of revenue. We had some improved contract terms and, of course, the market is currently a seller's market. Our team, Peter and everyone, did a great job negotiating some better terms for us for the short, medium, and long term. So that's probably more reflective of what you will see moving forward. Long term, there is potential for improvements as La Preciosa's grade improves as a percentage.
Okay. That is helpful. My other questions were covered by the prior caller, so I will turn it over.
Thanks, Joe.
Thank you very much. Our next question is coming from Matthew O'Keefe of Cantor Fitzgerald. Matthew, your line is live.
Thanks, operator. Good morning. Great quarter. Most of my questions were answered, but I just had a longer-term one. The last chart you referred to showing your growth profile over the next five years obviously has a big contribution from La Preciosa. You do have the oxide tailings in there starting in 2028. Just wondering if you could talk about the oxide tailings — is that still being pushed forward or are there any plans? Given the success at La Preciosa and the change in the metal price environment, are we looking at acceleration or more growth potential from La Preciosa oxide tailings?
We are doing community engagement; we need the blessing before we can apply for permits. That is ongoing with La Preciosa. We have engaged an outside engineering firm to look at other alternatives including higher throughput at Avino or possibly a stand-alone operation at La Preciosa, but we do not have that information yet.
Right. Okay. But that is clearly something to be looked at at this juncture. Great. That is really it for me.
Thanks.
Thank you.
Thank you very much. Our next question is coming from Brendan Hoff, a private investor. Brendan, your line is live.
Thank you very much. Kudos on a great quarter, by the way.
Thank you.
My question is more conceptual. You talked about becoming a mid-tier producer in Mexico. I can look up the definition of that, but what does that definition mean to you guys? What metrics are you going to hit that make you say we have made it? Is it ounces per year, revenue, profit, tons processed per day, or a combination?
When we acquired La Preciosa, we looked at what a mid-tier producer looked like, and it was between 8 to 10 million ounces of silver equivalent on an annual basis. So that is where we developed the thought and idea to get to that range.
To your point, there is no clear definition. The goal with our five-year program was to get to 8 to 10 million ounces. Even falling short of that, we could still categorize ourselves as a mid-tier producer and go above that as well. We would evaluate production, revenue, and profit, but the number one target was production. If we hit production targets, revenue will go up, especially with the current higher metal prices.
Good way to put it. I was wondering if you were looking at specific metrics like tons processed per day or revenue per quarter to say we've made it. Thanks a lot, guys.
Thank you very much.
And our next question is coming from Atul Bhagar of Abbott. Atul, your line is live.
Hi, it's actually Carl, not Atul. Great quarter, as everyone has said. Two questions that people have not mentioned so far. First, given the high price environment we have had, have there been any further discussions internally on the possibility of hedging a portion of production? I know previously you guys have not been keen on that, but obviously the price dynamic has changed considerably. Secondly, you used the ATM facility during Q1. What are the thoughts on that going forward? Given the balance sheet, is that no longer a requirement or something you might still lean on?
Those are good questions. On hedging, we are very bullish on the silver price and prefer to have our shareholders unhedged. We have looked at some non-primary metals like copper, but we are not planning to hedge any of our silver production at this time. One thing to highlight is that based on optionality in our contracts, we can deliver higher realized silver prices than the average for the quarter when we choose, but we are not planning to hedge future production. On the ATM facility, we used it in January when we hit all-time highs. As of now, we have no plans to use the ATM and we are looking to preserve our capital structure.
Thank you.
Thanks very much. Just to double check, if anyone else has any remaining questions, you can join the queue by pressing *1 now. I am not seeing anyone else in the queue. So we have reached the end of our question and answer session. I will now hand back over to David Wolfin for closing comments.
Thank you again to everyone for joining us today and for your continued interest and support of Avino Silver and Gold Mines. We are encouraged by the strong start to 2026 and remain focused on executing our clear path for transformational growth. With continued operational improvements, advancement at La Preciosa and a strong balance sheet, and a disciplined approach to capital allocation, we believe Avino is well positioned to continue creating long-term value for our shareholders. We look forward to updating you on our progress in the coming quarters. Have a great day!
Thank you very much. This does conclude today's conference. You may disconnect your phone lines at this time and have a wonderful day. We thank you for your participation.