Avino Silver & Gold Mines (ASM) Q1 2024: Cash Costs Drop to $14.89, Paving Way for La Preciosa Ramp
Avino’s Q1 saw its lowest quarterly cash cost per silver equivalent ounce in a year, as disciplined cost controls and higher mill throughput fueled margin gains and free cash flow. The company is now positioned to accelerate its La Preciosa expansion, with permitting and stockpile processing set to drive the next leg of growth. Investors should watch for the upcoming permit milestone, which management calls a “game changer.”
Summary
- Cost Structure Reset: Unit cash costs hit a 12-month low, unlocking margin and cash flow flexibility.
- La Preciosa Activation: Stockpile processing and long-term land deal advance the company’s next growth phase.
- Margin Tailwinds Building: Higher metals prices and grade improvement set up Q2 for stronger results.
Business Overview
Avino Silver & Gold Mines (ASM) is a Mexico-focused precious metals producer, generating revenue from silver, gold, and copper mining and processing. Its business model centers on operating the Avino mine and mill complex, with production growth targeted through the development of the La Preciosa project and the oxide tailings initiative. Key segments include silver equivalent production (combining silver, gold, and copper output), with operational focus in the Durango region.
Performance Analysis
Q1 2024 marked a step-change in Avino’s cost discipline and operational execution. The company delivered a 26% YoY revenue increase, driven by higher sales volumes and improved realized silver pricing. Gross profit and EBITDA both improved over prior quarters, while net income swung positive, reflecting the combined impact of higher throughput and lower per-ounce costs.
Cash cost per silver equivalent ounce fell to $14.89, its lowest in the trailing 12 months and below the 2023 average, despite persistent strength in the Mexican peso, which has pressured local cost structures. All-in sustaining costs (AISC) also dropped to $20.23 per ounce, underscoring the effectiveness of cost reduction measures implemented in late 2023. Operating cash flow turned solidly positive, with $2.3 million generated post-working capital, allowing Avino to end the quarter with nearly $10 million in working capital—double the prior year’s level.
- Unit Cost Compression: Sustained cost reductions outpaced inflationary headwinds, pushing margins higher even as peso strength persisted.
- Production Leverage: Mill throughput rose 18% QoQ, supporting volume-driven operating leverage and improved per-ounce metrics.
- Free Cash Flow Turnaround: Positive free cash flow for the first time since 2022 reflects a foundational shift in financial resilience.
Management’s disciplined cost management and operational focus have positioned Avino for a growth pivot, with La Preciosa and higher grades at Elena Tolosa expected to further enhance results in coming quarters.
Executive Commentary
"2024 has started strong, and we are on track to meet our production target for the year. Our first quarter production results saw a notable improvement to mill throughput of 18% compared to Q4 2023, which contributed to positive overall results."
David Wolfen, President & CEO
"We were free cash flow positive for the first quarter since 2022, a testament to cost management company-wide. With the increases in metal prices and the anticipation of La Preciosa, we are looking forward as our focus shifts over to the growth side throughout the rest of 2024."
Nathan Hart, Chief Financial Officer
Strategic Positioning
1. La Preciosa as Growth Engine
La Preciosa, Avino’s next major project, is now a central pillar of the company’s five-year growth plan. The long-term land use agreement secured in January de-risks development, while stockpile processing through Avino’s mill circuit has already commenced. Environmental permit applications are underway, with management targeting receipt within the year. This project is expected to significantly scale silver equivalent output by 2029, from 2.5–2.8 million ounces to 8–10 million ounces.
2. Margin Expansion Through Cost Control
Avino’s multi-quarter cost reduction program is now yielding tangible margin expansion, with both cash costs and AISC at their lowest levels in a year. The company has matched haulage rates to throughput and leveraged a large ore stockpile to drive down per-unit costs, offsetting peso-driven inflation. This margin discipline provides a buffer for volatility and funds future growth.
3. Operating Leverage to Metal Prices and Grade
With silver, copper, and gold prices each up over 15% since April, Avino stands to benefit from significant operating leverage. The company is also mining higher-grade zones at Elena Tolosa, which is expected to further boost silver output and margins in Q2 and beyond.
4. ESG and Community Integration
Avino’s ESG and community engagement programs are integrated into its operating model, supporting local employment, education, and infrastructure. This social license underpins project development and risk mitigation, particularly as the company advances La Preciosa and the oxide tailings project.
Key Considerations
Avino’s Q1 results reflect a business in operational transition, with cost structure reset and growth optionality through La Preciosa. The following points frame the company’s strategic context:
- La Preciosa Permit Timing: The environmental permit is the critical next milestone; its approval will unlock further development and production ramp.
- Metal Price Sensitivity: With substantial leverage to silver, gold, and copper prices, Avino’s free cash flow profile will swing with commodity volatility.
- Peso Strength Risk: The majority of costs are peso-denominated, making local inflation and currency strength a persistent margin risk.
- Organic Growth Pathway: Existing infrastructure and proximity of assets enable scale-up without major new capex, reducing execution risk compared to greenfield peers.
Risks
Key risks for Avino include permitting delays at La Preciosa, as environmental and construction approvals are sequential and subject to regulatory timelines. Persistent strength in the Mexican peso could continue to pressure unit costs, especially if metal prices weaken. Execution risk remains as the company transitions from single-mine operation to multi-asset production, with potential for operational or community challenges as new projects ramp.
Forward Outlook
For Q2 2024, Avino expects:
- Continued cost discipline and margin expansion, supported by higher grades at Elena Tolosa and robust metals pricing.
- La Preciosa stockpile processing to contribute to production, with permitting progress closely watched.
For full-year 2024, management reiterated its production target of 2.5–2.8 million silver equivalent ounces, with upside potential from La Preciosa and further grade improvement. Management emphasized that the receipt of La Preciosa’s environmental permit is the “game changer” to watch, and that cost controls remain a top priority as the company shifts focus to growth execution.
- Permit approval for La Preciosa remains the gating item for the next phase of expansion.
- Metals price tailwinds and cost management are expected to drive a stronger Q2 financial profile.
Takeaways
Avino’s Q1 marks a clear inflection in cost structure and free cash flow, with operational momentum setting the stage for La Preciosa-driven growth.
- Margin Reset: Lowest cash costs in a year and positive free cash flow signal foundational improvements in financial resilience.
- Growth Optionality: La Preciosa development is advancing, with permitting and stockpile processing to drive step-change in scale.
- Investor Watchpoint: The timing and outcome of La Preciosa’s permit process will dictate the pace and magnitude of Avino’s multi-year growth trajectory.
Conclusion
Avino delivered on cost control and operational execution in Q1, positioning itself to capitalize on project-driven growth and commodity price upside. The coming quarters hinge on La Preciosa’s permit progress, which will determine whether Avino can realize its ambition of tripling production by 2029.
Industry Read-Through
Avino’s results provide a clear read-through for small and mid-cap precious metals producers facing local inflation and currency headwinds: cost discipline and infrastructure leverage are key to margin resilience. Permitting timelines remain the critical gating factor for brownfield expansion in Mexico, and proactive community engagement is now table stakes for successful project execution. For the broader silver and gold sector, operational flexibility and sensitivity to metals prices will drive divergence in free cash flow and valuation multiples, especially as commodity volatility persists and regulatory scrutiny intensifies.