Discovery Silver’s Tony Makuch Wins CEO of the Year

Discovery Silver: Performance, Growth & Strategy - A Detailed Summary

Key Concepts:

• Porcupine Joint Venture: Discovery Silver’s primary asset, a gold-producing complex acquired from Newmont and Kinross.
• All-In Sustaining Cost (AISC): A key metric in gold mining, representing the total cost to produce an ounce of gold.
• Cordderero Project: A significant development project in Mexico with substantial potential.
• Free Cash Flow: The cash a company generates after accounting for capital expenditures.
• Technical Report (PA Level): A comprehensive report outlining a mining project’s resources, reserves, and economic viability, adhering to specific reporting standards.
• Capital Allocation: The process of deciding how to invest a company’s capital for maximum return.
• Prospectivity: The potential for discovering additional mineral resources.

I. 2025 Performance & Operational Successes

Discovery Silver achieved impressive results in 2025, producing 180,000 ounces of gold, generating a net profit of $107 million USD, and achieving free cash flow of $172 million USD. Beyond the favorable gold price environment, CEO Tony Makuch highlighted the successful integration of the workforce acquired from Newmont and Kinross as a key driver of this performance. He emphasized the high skill level and motivation of the integrated team, describing a collaborative environment where “the power of a thousand people pulling together” yielded significant success. The company’s ability to quickly integrate this workforce was a major contributor to exceeding expectations.

II. Addressing Challenges & Navigating the Rising Gold Price

While 2025 was largely successful, some aspects didn’t proceed as quickly as planned. Mobilization of drilling equipment and completion of drilling programs experienced delays. However, the significant increase in the gold price (from $2,500/ounce to over $4,000/ounce) presented both opportunities and challenges. The higher price created increased demand and pressure on suppliers, diamond drillers, and equipment manufacturers, as well as heightened competition for skilled labor. Makuch acknowledged this, stating that while the price increase was beneficial, it also introduced complexities.

III. The Porcupine Acquisition & Accelerated Investment

The timing of the Porcupine acquisition proved particularly advantageous given the subsequent surge in gold prices. This allowed Discovery Silver to significantly increase investment in the asset. Initially planning to spend $50 million annually on exploration, the company is now allocating over $65-70 million. This increased investment is fueled by improved financeability and the substantial free cash flow generated. In 2025 alone, the company paid nearly $100 million in taxes, demonstrating immediate profitability.

IV. Unlocking Potential at Porcupine: Exploration & Mine Life Extension

Discovery Silver is actively focused on demonstrating the long-term potential of the Porcupine asset. A preliminary assessment (PA level technical report) indicated mining potential at the two underground mines until 2030-2031 and at the Pamar open pit beyond 2047. Current exploration efforts aim to solidify these projections and extend resources at Borden, Boil Pond, and Pamar. Makuch believes Porcupine was previously a “stranded asset” within Newmont’s portfolio, lacking the necessary investment and attention. The company’s strategy involves increasing resource size and reserve base, ultimately leading to increased production. A key focus is reducing operating costs through infrastructure investment and process improvements as resource reliability increases.

V. Human Capital & Workforce Motivation

The change in ownership at Porcupine has had a positive impact on workforce morale. Makuch noted that employees, previously feeling neglected under Newmont, are now highly motivated by the new investment and focus on the asset. He emphasized that employees are proactively identifying areas for improvement and requesting capital investment to implement their ideas, leading to increased productivity and a collaborative environment.

VI. Balance Sheet Management & Capital Allocation

Discovery Silver’s strong free cash flow has enabled it to reshape its balance sheet. The company has reduced debt, built up its cash reserves, and continues to invest heavily in Porcupine. A previous working capital line with Franco Nevada, carrying a high interest rate, was replaced with a more favorable credit facility. The company is prioritizing investment in the business to drive equity value, rather than immediate shareholder returns through dividends.

VII. Cordderero Project in Mexico & Security Concerns

The Cordderero development project in Mexico is progressing, with positive signals from the Mexican government. The company has applied for a change of land use and is updating the feasibility study, including a revised capital cost estimate. However, recent violence in Mexico, including kidnappings and murders of workers at competitor sites, has raised security concerns. Makuch emphasized a heightened focus on security across all facets of the business, including personnel, procurement, materials, and financial systems, raising the standard for security protocols.

VIII. Investor Focus & Sector Outlook

Investors are primarily focused on the growth potential at Porcupine, specifically the pace and impact of capital investment. Questions also arise regarding the Cordderero project and its progress. Makuch believes the industry is experiencing a period of significant development potential, fueled by high margins and increased project financeability. He cautioned against complacency, emphasizing the importance of maintaining low costs and preparing for potential cyclical downturns in the gold price. He stated, “You’ve got to survive the low parts of the cycle, not the high parts of the cycle.” He anticipates long-term strength in precious metals but stresses the need for cost discipline.

IX. CEO of the Year & Future Strategy

Tony Makuch was awarded Kitco Mining’s CEO of the Year award, recognizing Discovery Silver’s achievements in 2025. The company’s strategy for the next five years centers on investing in its assets to improve equity value, focusing on resource expansion, cost reduction, and the development of new mines.

Notable Quote:

“Success we can either have one or two people trying to pull push push a bunch of others along or you or the power of a thousand people pulling together.” – Tony Makuch, on the importance of team integration and collaboration.

Conclusion:

Discovery Silver is demonstrating strong performance and a clear strategic vision. The company’s successful integration of the Porcupine asset, coupled with a proactive approach to exploration and cost management, positions it for continued growth. While challenges remain, particularly regarding security in Mexico and the cyclical nature of the gold market, Discovery Silver appears well-equipped to navigate these complexities and deliver value to shareholders through strategic investment and operational excellence.