Primary Silver Player Focuses on Mexico

Q: What were the key events in 2019 for Avino Silver and Gold Mines?

A: 2019 was a transitional year for us. The transition began with the winding down and ultimately the termination of mining at San Gonzalo in Q419. The San Gonzalo mine, which began commercial production in 2012, outperformed its five-year mine life by two years and produced just over 6 million silver equivalent ounces at an average, all-in sustaining cash cost per silver equivalent ounce of under US$10. Furthermore, we sold our Canadian assets to refocus the company on Mexico.

We completed an expansion to our processing plant at the Avino mine with the addition of a fourth bulk floatation circuit, increasing the combined put capacity of the plant to 2,500 tons per day. Moreover, we are directing our exploration efforts to Avino. It is an extensive property with 20 named veins and over 50 additional unnamed veins. Only three have been mined over the last two decades.

Q: Why is there still so much exploration to be done at a property where you have been working for several decades?

A: From 1974 to 2001 we were the minority owner. The majority was a private Mexican family. The Avino vein is huge, and the majority owners felt they did not need to explore anywhere else. They were not promoting a public company. The state of affairs was good enough for them. Once we became full owners of the project, we redeveloped it and expanded production. Now, we are investing in exploration. In 2020, US$1.5 million is going to be spent on a drilling campaign. There is a vein on the property called El Trompo, which is our main focus of exploration along with another one called Santiago. They are two high-grade veins with a great deal of potential. Our measure for success is our San Gonzalo project. Before we started the mine, there were 500,000 tons of ore. That is the figure we use to justify another mine.

An encouraging aspect is that the Avino mill has four independent circuits. We could process production from a new mine through a separate individual circuit. This is important because we are expecting to find a higher grade. Also, minerals can be different. The property is unique. It is structurally controlled. When the structures moved millions of years ago, they twisted in between, opening conduits. When the solutions came up, they were trapped in the dikes and fractures and falls. We do not know how deep they go. In fact, the story goes back to 1558. A soldier in Cortez’s army claimed to have found a mountain of silver. It is amazing that after all these centuries there is silver remaining. We have been mining only two veins, and some of the other historical mines were small. We do not know what is under them.

Q: Now that you are a primary silver player focused in Mexico, how do you benchmark against your peers?

A: Avino Silver and Gold Mines is undervalued in comparison to its peers. This is due to the factors involved in our 2019 transition. Our high-grade closing sent our AISC up. After selling our Canadian assets, we have a stronger balance sheet: close to US$10 million in the bank and US$13 million in working capital.

The short-term goal is to duplicate the success of our high-grade mine that closed in 2019. A discovery can be monetized quickly, as there are good existing conditions. For example, there is a processing plant very close by. We are confident we will get our AISC back down to the level it was when our high-grade mine was operating. Our market value will then go up. In any case, including our operating and capital expenses, we will spend around US$40 million in 2020.

The long-term depends on metal prices. If they go up, we will allocate more capital to exploration. At our current grade, profits are marginal. They are enough to keep us going but to grow we need to find higher grade. We also want to improve the technology in our operation, such as introducing automation in the mill to realize more efficient recovery rates.

Q: What has been the impact of this mine on the local communities?

A: Before we reopened the mine in 2012, the parking lot outside was empty. Now it is full of cars. The mine helped people afford cars. Not only that, many of the plates on the cars are from places like Texas and Arizona, meaning that people that were living abroad are now able to come back home and find good employment. We have detonated economic development around the mine. We are proud to maintain a 100 percent Mexican workforce and our turnover rate is low.

Avino Silver & Gold Mines is a precious and base metals producer with a diversified pipeline of silver, gold and base metals properties in Mexico.

As a result of the COVID-19 outbreak, Avino Silver & Gold Mines temporarily suspended operations at the Avino Mine in Durango to comply with the Mexican Government’s order that comprises all non-essential businesses including the mining industry. The suspension of activities is expected to be lifted in May 2020. The company’s plans for the remainder of 2020 will likely differ from what was discussed in this interview.