Guanajuato Silver Company Ltd V.GSVR

Lex Takes A deep Dive On GSVR

[ErinBrockovich]

@lexconThe $26 AISC is the overall composite AISC. VMC (Valenciana and San Ignacio) is under $20 and Topia is just over $21. El Cubo is over $32 and is that high partially due to the significant reduction in processed tonnage lately while dewatering. In 3Q 76% of the production came from the two low cost centers (El Cubo was ramped down). In a recent interview James said they are already seeing improvements at Topia with the structural changes to contract mining. Does that put that processing plant under $21 AISC soon? Who knows? But they are adding faces and new stopes at El Cubo with the dewatering progress---the dewater is ongoing for some while yet to get to where they want to be but has already opened up some accessible higher grade zones. As they put that higher grade ore thru the mill at El Cubo they likely will ramp up production totals accordingly as well. Any increase in tonnage at El Cubo spreads the fixed costs over larger number of ounces and reduces AISC at that location. I believe James did state it will take 3 or 4 more quarters to get composite AISC down where they want to see it at, where they are targeting and when they can slow the capital spending rate. But simple math says if VMC remains constant, if Topia has a slight reduction in AISC and if El Cubo increases tonnage and grade (reducing the current AISC from $32.67 to anything lower) then we should see some reduction in AISC for each of those next 4 quarters---ie, we won't remain at $26+ elevated AISC for the next 4 quarters and then see a step change lower---rather I expect to see a steady decline in AISC over each of the next four quarters (showing a positive trend change) with the end AISC much lower than current.