Responsible Mining Builds Value for all Stakeholders

Q: What is Torex Gold’s approach to responsible mining?

A: Socially responsible mining in Guerrero is integral to our identity. Since our inception, we have worked closely with local communities to ensure that our presence generates positive outcomes. This includes creating well-paying jobs, establishing beneficial contracts, improving access to education for young women and men in the area, and investing in community infrastructure, such as safe drinking water, treatment systems, electricity, and roads. In 2023, we employed about 1,200 people at the Minera Media Luna, with an additional 3,000 contractors. Indirectly, our operations create about 13,000 jobs a year in Mexico. Torex Gold is a significant economic driver for local communities, the state, and the federal government.

A 2023 study highlighted the direct, indirect, and induced benefits of our mining operations in Guerrero, revealing that we contribute about 3% to the region's GDP. Considering the unfortunate events that took place in Acapulco in October 2023 due to Hurricane Otis, this percentage may have increased since then.

We are proud to say that almost 70% of our employees are local to Guerrero. Moreover, we are committed to responsible tax and royalty payments. Additionally, we provide essential services like medical, dental, and ophthalmological care to our communities, often reaching areas where government services are limited. Our mission is to transform finite mineral resources into lasting prosperity by positively impacting all the lives we touch. We envision continuing our mining activities in Guerrero for decades, particularly with the Media Luna mine.

Q: How can mining companies leverage communication strategies to enhance their reputation and improve their standing within society?

A: Successful community relations are reliant on effective communication. Communication is not just about speaking but also about listening. It is crucial to communicate about the mine, employment opportunities, challenges, and to listen to the community's feedback, concerns, and needs. We have made a concerted effort to be present in the community, with storefront offices that allow for continuous interaction rather than just occasional visits. This way, when community members want to speak or be heard, someone is there to engage with them.

We have 11 agreements in place with surrounding communities. These agreements ensure that all communities are treated fairly, with local decision making addressing local priorities. This approach has helped us move beyond mere social tolerance to social endorsement, where communities actively support and endorse our efforts.

Q: What are the latest changes within Torex Gold's investment plans for 2024?

A: A major change is that we are transitioning into becoming a more significant copper producer, which attracts investors bullish on the copper market and opens up the possibility of mining in Morelos for decades to come.

Our focus on community investment and infrastructure remains unchanged, and our cost profile is stable, ensuring healthy margins. We anticipate generating about US$200 million per year in free cash flow once Media Luna is operational, a milestone that will make us free cash flow positive, enabling opportunities for growth beyond Guerrero.

In 4Q23, we achieved three major milestones. First, we received our final permit, fully sanctioning our construction and operational phases. Second, we successfully completed a critical tunnel for the Media Luna deposit, which is 7km away from our processing plant. Finally, we achieved a major de-risking milestone by having more cash and credit available than is required for the remaining spending on Media Luna. This means we are fully financed from our own cash generation, without the need for capital raises, streaming, or royalties. Our focus remains on operational efficiency, cost management, and maintaining a strong balance sheet. We are well-positioned from a permitting and financial perspective and look forward to bringing the mine into operation by the end of 2024.

Q: What factors drove Torex Gold to consider building an underground tunnel crossing the Balsas River?

A: Torex follows a disciplined process when allocating capital, considering technical, commercial, business, and social risks. When deciding how to transport ore from the south side to the north side of the river, we assessed environmental permits and the risk of dropping materials into the river to decide to go over, on, or underneath the river. We chose to go underneath because it is a long drive from the Media Luna deposit to our processing plant. We also recognized the potential on the south side of the river. The tunnel allows us to move waste on a conveyor, which is efficient, safe, and energy-friendly, facilitating the transfer of personnel and equipment between the two sides. This tunnel serves as the main artery connecting both sides of the Balsas River, showcasing our vision for the prospectivity of copper and gold on the other side. .

Q: What is Torex Gold’s exploration investment plan for the short term?
A: Our Company has a renewed focus on exploration, because we know the enormous geological potential of the Morelos Complex. In 2024, we allocated US$30 million to exploration, roughly evenly split between the south and north sides of the river. Our plan includes continuing  our investment in El Limon Guajes (ELG) underground, with US$12 million budgeted for infill and step-out drilling to ensure the mine's longevity while we produce at Media Luna.

We are also investing US$15 million on the south side of the river. Several areas of Media Luna can be further explored, including Media Luna West, Media Luna East, EPO (a zone north of Media Luna), and Todo Santos. With such a vast area to explore, our geology team is thrilled to have the budget and flexibility to not only fill the mill toward 2027 but also to potentially explore the entire 29,000ha and discover the next Media Luna.

Q: What are Torex’s overall plans for 2025 and beyond?

A: The next steps for the Morelos Complex, which includes the ELG mine complex, Media Luna project, processing facilities, and related infrastructure, is to keep our mill full post-2027. We now have visibility to produce about 450,000oz/y until the end of 2027 and we are focused on extending this production rate until at least 2033. We have specific targets to further strengthen the feed pipeline to ensure the mill remains full, which is crucial for cash generation and maximizing the value of our producing assets. Our priority is to continue drilling to support these goals.

We anticipate returning to being cash flow positive in mid-2025. Running a cash-negative business during a heavy investment cycle is challenging, so returning to positive cash flow is a significant milestone for us and our investors. We are considering returning capital to our investors, once we achieve free cash flow positivity. We are open to mergers and acquisitions (M&A) opportunities, particularly in gold, copper, or other precious metals, including silver. We are considering opportunities in Canada, the United States, Mexico, and other places in Latin America. Our main criteria for M&A opportunities are whether there is a clear pathway to cash generation and whether we can unlock additional value using our Torex systems and team.

Q: What factors is the company evaluating to consider an M&A in Mexico or abroad?
A: We will consider assets that fit well in our portfolio and are cash-generative in Canada, Mexico, or Latin America. We have demonstrated our competence and success in Mexico, where we have invested significantly and have a highly skilled team. We have also established relationships based on trust and mutual respect in the political environment here. We will continue to explore opportunities in Mexico while also considering options elsewhere.

Jurisdiction also weighs on us when considering M&As, but it is only one element among many. The most critical consideration is whether the acquisition will create value for our shareholders. We prioritize making smart acquisitions that not only make us a bigger company but also a better and stronger one.
 

Q: What key factors have influenced the company’s success?

A: Operational discipline is paramount to us and involves two key components: a talented, committed team and strong systems. We have a rigorous systems approach to planning, scheduling, and executing maintenance and production work. This commitment to adherence to systems is evident in our results, especially in safety. Despite having an additional 1,200 contractors at the Media Luna project last year, we had zero lost time entries. ELG celebrated 10 million hours without a lost time entry for the third time since 2020.

This success is due to visible, hands-on leadership in the field, where leaders engage with employees, demonstrating care and concern. Our approach also ensures that high-hazard mining work is consistently executed safely. Planned and scheduled work is inherently safer, as it avoids situations where employees are scrambling to find parts, materials, or tools, leading to frustration, mistakes, and injuries.