Could you introduce the Campo Morado mine and the optimization program underway?

Campo Morado is an underground VMS-style, polymetallic mine, producing gold, copper, silver, zinc, and lead. The mine has been in production for 15 years. In the last six months, we increased mill throughput from 1,500-1,600 tpd to 2,000 tpd, and we expect to reach nameplate capacity at 2,400 tpd throughout 2025. With the mill at full capacity, we would be producing AuEq of 80,000 oz (Koz). As part of the optimization program, we will improve mill recoveries and the payabilities of the concentrates; Campo Morado produces concentrates which we sell to Trafigura. 

Luca Mining has launched the first drilling program in over a decade at Campo Morado. What is the focus of this campaign?

Luca Mining acquired Campo Morado in 2021, refinanced it in 2023, and I came aboard in 2024 to complete the financing and execute a ramp-up plan. Now that we are fully financed and in a position to devote capital to expansion, we kickstarted the first drill campaign since 2011. This will be an evergreen, ongoing drill campaign with three main goals: The first scope, absorbing about 40% of our exploration budget, is to identify near-mine, high-grade material, with direct implications on our cash flow generation; The second priority, accounting for another 40% of our budget, is to extend the life of mine by finding additional higher-grade and larger ore bodies in the proximity of the mine; and the third goal is to conduct truly greenfield exploration on underexplored parts of the properties, for which we allocated 20% of the budget. The first set of drilling results will be out in the next six to eight weeks, but exploration will be continuous, in parallel with our mining operations. 

What opportunities do you identify at your second asset, the Tahuehueto underground mine?

Tahuehueto is a smaller mine, an epithermal gold-silver underground deposit located on the Sierra Madre Belt, in Durango, Mexico. The project was rushed into production by the previous management, but we are re-focusing on drilling to understand better what we actually have at the property in terms of potential resources. We are currently mining from a small inventory with an annual production of 25-30,000 oz AuEq/year, at best. However, given the potential of the area, with nearby mines like Majestic Silver Corp’s San Dimas mine, we believe we can find a bigger ore body to support a much larger operation. 

Could you provide insights into your current financial position and the potential for shareholder returns, including dividends, in the future?

Luca Mining successfully raised US$11.5 million in September, issuing shares at $0.45 CAD with warrants at $0.60 CAD per common share. Our investors were satisfied to see the share price doubling since, shooting to $1.15 CAD today, which is both a reflection of diligently executing our business plan, as well as the tailwinds of a good market, with investment sentiment in Mexico improving. The proceeds from our cash flow operations along with warrant exercises will be used to pay residual debt, invest in capital upgrades at the mine, as well as advance the exploration programs I outlined earlier. Additionally, we are actively assessing options for returning capital to shareholders, which may include a dividend distribution or a share buyback program.

How do you observe the current operational and business environment in Mexico? 

We are past the point of maximum pessimism. Fears that Claudia Sheinbaum’s government will simply continue AMLO’s agenda have not materialized. Rather, the political discourse around resource extraction appears to be guided by common sense and an understanding of the importance of mining to Mexico’s economy. The change in government has also helped diffuse the personal tensions that previously existed between AMLO and certain executives of Mexican mining companies, as well as between politicians and business leaders more broadly. Such personal feuds are no longer a feature of Sheinbaum’s administration, as demonstrated by the recent award of permits to companies such as Agnico Eagle and Teck Resources. Moreover, the basket of mining stocks for companies operating in Mexico has outperformed, accompanied by a surge in M&A activity. Notable transactions, such as First Majestic’s acquisition of Gatos Silver and Coeur Mining’s takeover of SilverCrest Metals, reflect a renewed sense of confidence and optimism toward Mexico, sentiments that were simply absent during AMLO’s tenure.

What are the advantages of having a diversified commodity exposure, with both precious and base metals? 

Base and precious metals are often viewed as opposing forces in relation to economic cycles: during periods of economic slowdown and quantitative easing, precious metals tend to appreciate, with gold and silver serving as hedges against depreciating traditional currencies. Conversely, in a high-growth economy, strong demand drives up prices for base metals essential to industrial expansion. However, these relationships are not as cut-and-dry as traditional market theory indicates. Despite copper’s underperformance this year, the outlook for both precious and base metals remains positive, largely fueled by inflation. On any given day, investor sentiment may tilt more toward the base or precious metals, and we are strategically positioned with a well-balanced exposure: 35% gold, 22% copper, 16% silver, and 25% zinc.  Of course, this leads to some confusion about our classification - is Luca Mining a precious metal or a base metals company?  But as industry trends show, these distinctions are becoming increasingly fluid.  Companies like Agnico Eagle and Barrick Gold are entering the copper space, further blurring the lines between the two sectors.

Finally, is Luca mining assessing M&A opportunities in Mexico?

Our strategy is straightforward: acquire underperforming assets, inject capital, bring in the right expertise, and turn these assets around, making them more investable. The long-term vision is to repeat this strategy on a broader portfolio of assets. Following our success in the year, we are starting to be presented with new opportunities from market players, investment banks, and industry partners like Trafigura, Mexico’s largest concentrate buyer. They see what we managed to do and they start to think “Maybe this mine would be better operated by the Luca team.” Companies like First Majestic or Endeavour Silver have proven how lucrative such a strategy can be, and I believe we are in a very interesting niche where we can turn a US$100 million acquisition into a billion-dollar businesses.