Key points for investors:
- Operational: Q1 production was down quarter-over-quarter due to planned mine sequencing at Media Luna (lower-grade, lower-recovery stopes) and two extended plant maintenance events (one unplanned SAG mill bolt replacement). Plant performance has since recovered and reached >11,400 tpd in April. Mining rates at Media Luna (7,500 tpd) and ELG underground (above 2,800 tpd) are ahead of plan. Media Luna North development is on schedule (north adit breakthrough midyear, main ramp breakthrough late June) with first ore targeted in December 2026. Los Reyes PEA remains on schedule for midyear, targeting 5,000 tpd and ~140–150 koz AuEQ/year initial production; site access/field work timing remains dependent on government/community discussions. Exploration continues to show resource expansion potential across Media Luna cluster and ELG underground.
- Financial: Q1 AISC was $1,917/oz (above guidance) driven by lower finished production, higher reagent use, and a stronger Mexican peso; however, AISC margin hit a record 60% for the quarter. Record quarterly revenue and adjusted EBITDA were reported. After $165M of taxes and royalties, Torex generated $157M of free cash flow, repaid remaining debt and returned $121M to shareholders (dividend + buybacks). Q1 cash was $130M and total available liquidity $467M; management targets a minimum cash balance of $200M going forward.
- Capital allocation & returns: Management forecast ~ $650M of free cash flow at current spot prices for 2026 and announced an enhanced return-of-capital program targeting $350M to shareholders in 2026 (includes the $121M already returned in Q1). Dividend was increased to CAD 0.16 per share (annualized). Capital priorities remain: (1) invest in Morelos (including $45M drilling and $100M to complete Media Luna North in 2026), (2) advance development/exploration pipeline (Los Reyes, Sinaloa, Chihuahua, Nevada), (3) maintain balance sheet strength (>= $200M target), and (4) shareholder returns.
- Guidance & outlook: Management remains on track to meet full-year production and cost guidance, expects Q2 to be similar to Q1 (with higher grades and recoveries in H2 improving production/costs), and anticipates costs moderating in the back half of the year. Key near-term catalysts: Media Luna North adit breakthrough, Los Reyes PEA (midyear), ongoing exploration results and year-end resource update.
- Risks & drivers: Currency (stronger MXN) and higher reagent consumption from lower-recovery ore increased near-term costs (peso exchange added ~ $50/oz in Q1). Management has added peso hedges for 2026–2027. Diesel/energy cost exposure is limited due to underground operations and battery-electric fleet at Media Luna. Timing of Los Reyes site access depends on government/community engagement.
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