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Starcore International Mines’ main asset is the San Martin mine, an underground epithermal gold-silver operation about 50 km east of Querétaro City in Querétaro State, sitting on a land package of roughly 12,992 hectares. The second asset is La Tortilla, a historical high-grade silver mine held under a 10-year lease about 40 km from the San Martin plant. The conversation covers the fiscal year-end results, why costs went up and production went down, the carbonaceous ore circuit, permitting at La Tortilla, the recent geophysical survey, and two spin-out or divestment situations.

TL;DR

CEO Robert Eadie told me they had a rough operating year on purpose. Earnings came in at 8 cents per share for the year ended April 30, mining income was C$13.6 million, but production fell and all-in sustaining costs rose by roughly two thirds to almost $3,700 per ounce. His explanation is that $3 to $5 million of mill improvements meant equipment was down and the new carbonaceous circuit is still on a learning curve. He expects AISC to come back down once those improvements finish, and pointed to the quarter ending in late January as when you should see it, though he did not want to give a number. The strategy is three revenue streams within 18 to 24 months: oxide ore, carbonaceous ore, and La Tortilla. He says there is over $10 million in cash, positive monthly cash flow, and no plan to go back to market unless something big shows up. The two things he calls his upside are exploration at San Martin and at La Tortilla.

What have they done for shareholders lately?

Since the December interview they finished the fiscal year with positive earnings, kept the oxide circuit running while ramping the carbonaceous circuit to about 100 tonnes per day by the end of the last fiscal quarter, and started mining newly accessed higher-grade northern extensions. They completed a mobile MT and IP geophysical survey covering roughly 728 line kilometres of the property, run by Expert Geophysics out of Canada, and are still processing the data to generate drill targets. At La Tortilla they have the community agreement in hand, are in the environmental permitting process (the MIA), and have already answered the 14 follow-up questions the regulator sent back. On the corporate side, they spun the Côte d’Ivoire assets out to shareholders as EU Gold Mining (private, first drill program finished, results pending) and agreed to sell the Ajax molybdenum property in British Columbia to Korestar Exploration for C$100,000 cash and 2.5 million shares, valued by Eadie at about $600,000, while keeping a 2.5% NSR.

How much money do they have and what are they spending it on?

Eadie said cash is over $10 million and the company is cash flow positive every month, which is why he does not see a financing. The last raise was a $5 million financing at 25 cents with a half warrant at 35 cents late last year, and before that he says they had not been to market in about 15 years. He likes to keep roughly $5 million in the bank as a safety net, and the rest is earmarked for La Tortilla. On spending, getting La Tortilla to the point of shipping ore to San Martin costs about US$3.5 million, which he put at about C$5 million, drilling at San Martin is a minimum of $1 million, and the mill improvements including two more filter units are the $3 to $5 million program that has been driving sustaining costs up. He said sustaining capex should fall once those improvements are done. When I asked about corporate G&A he could not give me a number, said it is not broken out that way, and admitted it is easier to move G&A up than down, though historically the CEO and CFO have deferred pay three or four times when things got tight. Marketing is roughly $25,000 a month as a rough allocation, with no firm budget.

Upcoming catalysts

Technical: the summary of the geophysics and IP survey, drill targets being defined, and drilling starting at San Martin. Operational: updates on the plant improvements being finished, updates on carbonaceous ore recovery, and updates on La Tortilla, where he said meaningful production is his hope within a year and the three revenue streams are targeted at 18 to 24 months. Corporate: the Korestar listing, which he believes management is targeting for November, a possible EU Gold Mining listing that he expects within about a year of the March spin-out but says is not his call, the Nordic Investment Conference in October, a Vancouver open house, and PDAC next year. He would not speak for other directors on insider buying, and said only that he is one of the largest single shareholders and has not sold.

Risks

The obvious one is that permitting at La Tortilla slips. Eadie acknowledged directly that it could slow them down, and there is no official timeline on the second round of the environmental review after the first 90-day response. Grade and recovery are the other big ones. He said recovery is what the plan is most sensitive to, and that they blend high-grade pockets to keep recoveries consistent, so grade variability feeds straight into costs. He also said metal price is the assumption most likely to slip, and if gold fell, the response would be to delay drilling and other discretionary spending to stay profitable, which would push out the exploration upside. The mill improvements themselves are a risk in the near term, since he described a pattern where a planned one-week shutdown becomes two, and one piece of equipment built eight years ago that had never really run is causing problems.

Starcore CEO Interview

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