Santacruz Silver (TSXV:SCZ) - 2026 Set for More Gains as Large Treasury Builds

Santa Cruz Silver: 2026 Growth Strategy & Operational Review – Detailed Summary

Key Concepts:

• Multi-Jurisdictional Silver & Zinc Producer: Santa Cruz Silver operates mines in Bolivia and Mexico.
• Operational Efficiencies: Focus on cost per ton mined, rather than all-in sustaining cost per ounce.
• NASDAQ Listing: Strategic move to access US investors and institutional funds.
• Debt & Streaming Elimination: Company is now free of debt, streaming agreements, and royalties.
• Organic Growth: Expansion through existing mine optimization and new mine development (Sorakaya, Esperanza).
• Disciplined M&A Approach: Focus on accretive acquisitions with synergistic value.
• Long-Term Mining Strategy: Balancing short-term gains with long-term resource sustainability.
• Hydrological Management: Proactive water management strategies at the Bolivar mine.
• Flash Cell Circuit: Technology implemented at Simapan to improve silver recoveries.

1. Financial Performance & Balance Sheet Strength

Santa Cruz Silver experienced a strong 2025, driven by operational delivery despite a temporary setback at the Bolivar mine due to flooding. The company successfully amortized catch payments to Glencore, eliminating all debt, streaming agreements, and royalties. This results in a “very clean story” and balance sheet. The company ended 2025 with approximately $80 million in treasury, even after paying $70 million towards Glencore and tax installments. Strong metal prices are currently generating significant weekly cash flows. The company maintains a disciplined approach to financial management, prioritizing cost efficiencies and production improvements.

2. NASDAQ Listing & Investor Access

The company’s listing on the NASDAQ (January 21st) is considered a strategic initiative to attract US investors, including institutional funds and family offices. Trading volumes have already begun to increase following the listing. This access to capital is intended to support future growth initiatives.

3. Operational Optimization & Efficiency Initiatives

Santa Cruz Silver prioritizes operational efficiencies measured by cost per ton mined, rather than all-in sustaining cost per ounce. Key initiatives include:

• Simapan Mine Upgrade: Installation of a flash cell circuit is expected to improve silver recoveries by approximately 500 basis points, adding around $5 million per month in increased cash flow. The investment was $2.5 million.
• Cost Control: Continuous monitoring of operational costs, including inflation rates for consumables and equipment.
• Detailed Budgeting: A five-year budget is developed on a per-weekly basis for each mine, outlining production levels and expected output.
• Proactive Maintenance: Regular site visits by the COO and CFO to ensure cost awareness and efficient decision-making at all levels of the organization. Superintendents are required to present cost-benefit analyses for all proposed initiatives.

4. Bolivar Mine Flooding & Remediation

The Bolivar mine experienced flooding in two of its five veins, increasing water inflow from 104 liters per second to over 400 liters per second. The company responded by:

• Engaging Hydrological Experts: A team from Mexico with experience in dewatering mines was dispatched to Bolivia.
• Implementing Pumping Systems: New pumping stations were installed, increasing dewatering capacity to over 700 liters per second.
• Long-Term Planning: A hydrological team is developing a long-term plan for installing additional dewatering stations.
• St. Lucas Support: The sourcing company, St. Lucas, provided logistical support to maintain full capacity at the Diego milling facility.

5. Bolivia Regulatory Environment & Investment Climate

The recent presidential election in Bolivia resulted in a center-right government led by President Rodrigo Pace. This administration is actively working to improve the legal framework for foreign investment, declaring the mining industry a strategic sector for economic recovery. Santa Cruz Silver, as the largest underground mining company in Bolivia, is optimistic about the evolving regulatory environment. Constitutional changes are being considered to further encourage foreign direct investment.

6. Mexico Operations – Simapan Mine & Safety

Operations in Mexico, specifically at the Simapan mine in Hidalgo State, are proceeding well with a strong focus on safety. The company has invested heavily in level 960 of the mine, including:

• Equipment Acquisition: Purchase of 15 pieces of underground equipment.
• Infrastructure Development: Preparation of areas for dewatering stations and installation of two inclined shafts for ventilation.
• Milling Facility Upgrade: Installation of the flash cell circuit to improve silver recoveries.
• Security: A significant military presence provides security at the site.

7. San Lucas Mine Potential

The San Lucas mine is considered a key asset with significant potential. Level 960 is particularly promising, exhibiting wider veins and increasing silver grades (80-90 g/t) and zinc grades (2.5-3.5%). Drilling continues to reveal expanding mineralization.

8. Growth Strategy – Organic vs. M&A

Santa Cruz Silver’s growth strategy is based on three pillars:

• Operational Efficiencies: Expected to contribute 5-7% growth in 2026.
• Organic Growth: Driven by the Bolivar mine dewatering, Simapan mine upgrades, the Esperanza mine coming into production, and the development of the Sorakaya project. Sorakaya is expected to be fully permitted by summer 2026 with production starting in Q4.
• Disciplined M&A: The company remains open to accretive acquisition opportunities that offer synergies with its existing portfolio. Any potential acquisition must add value to the company and its investors.

9. Capital Allocation & Risk Management

The company emphasizes a disciplined approach to capital allocation, prioritizing investments with clear payback periods. While high metal prices provide flexibility, the company remains committed to its budget and long-term sustainability. The company avoids speculative investments and prioritizes projects that enhance operational efficiencies and resource longevity. The company’s CEO and CFO regularly visit mine sites to ensure cost awareness and responsible decision-making.

Notable Quotes:

• Aruro Presamu (CEO): “We have a very clean story, a very clean balance sheet.”
• Aruro Presamu (CEO): “We measure our operations on a per ton cost, not on an all-in sustained cash cost per ounce.”
• Aruro Presamu (CEO): “We have a view of these mines and of the company for a very long term.”

Conclusion:

Santa Cruz Silver is positioned for continued growth in 2026, driven by a combination of operational efficiencies, organic project development, and a disciplined approach to capital allocation. The company’s strong balance sheet, debt-free status, and access to US capital markets provide a solid foundation for future success. The emphasis on long-term sustainability and responsible mining practices underscores the company’s commitment to creating value for its shareholders. The successful execution of the Sorakaya project and continued optimization of existing mines will be key to achieving the company’s growth objectives.