Thank you for standing by. This is the conference operator. Welcome to the Avino Silver & Gold Mines Q3, 2021 Financial Results Conference Call. . I would now like to turn the conference over to Jennifer North, Manager of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to the Avino Silver & Gold Mines Limited Q3, 2021 financial results conference call and webcast. On the call today, we have the Company's President and CEO, David Wolfin; our Chief Financial Officer, Nathan Harte; our Chief Operating Officer, Carlos Rodriguez; and our VP of Technical Services, Peter Latta. Before we get started, please note that certain statements made today on this call by the management team may include forward-looking information within the meaning of applicable securities laws. Forward-looking statements are subject to known and unknown risks uncertainties and other factors that may cause the actual results to be materially different than those expressed by or implied by such forward-looking statements. The company does not intend to and does not assume any obligation to update such forward-looking statements or information other than as required by applicable law. For more information, we refer you to our detailed cautionary note in the presentation accompanying this call or on our press release of yesterday's date. I would like to remind everyone that this conference call is being recorded and will be available for replay later today. Replay information and the presentation slides accompanying this conference call and webcast will be available on the website. Thank you. I will now turn the call over to Avino's President and CEO, David Wolfin. David?

Thanks, Jen. Good morning, everyone, and welcome to Avino's Q3, 2021 financial results conference call and webcast. Thank you for joining us. Before we begin, please note that the full financial statements and MD&A are now available on our website. On today's call, we will cover the highlights of our third quarter 2021 financial and operating performance. Our plans for fourth quarter as well as recent announcement on the acquisition of La Preciosa project, and what that means for Avino and then we will go -- open it up for questions. Please note that all figures are stated in U.S. dollars unless otherwise noted. During the third quarter, we focused on the finalizing work and activities at the mine site leading up to recommencement of operations which was announced on August 3. We were extremely pleased to restart operations and is because of the hard work of the team in Mexico that it came to provision. The work included hiring mine personnel and reestablishing the mill circuits. In addition, in early July, we announced initial drill results from Phase 1 of the campaign. There were significant grades received at each location. We had results from El Trompo, Santiago and La Malinche vein. At the end of September 12,179 meters of drilling was completed. And as of today, we've drilled 13,427 meters. For the quarter, there was 4,931 meters drilled. The main areas for the third quarter of exploration included La Potosina with 601 meters, the Oxide Tailings with 1,931 meters and the Avino vein with 2,399 meters. Assay results are pending due to the long turnaround times at the laboratories and will be released once received and interpreted. Based on historical mapping of the Oxide Tailings, we've completed the drilling at the required spacing to move the project to the…

Thank you, David. It's my pleasure to be on the call. And I would like to welcome everyone who has joined us and viewing our presentation today. We are extremely pleased with the successful restart of mining operations at the Avino mine as well as the subsequent announcement of the strategic La Preciosa’s acquisition from core mining. The company remains well funded with $22.3 million in cash and $28.9 million in working capital available at the end of the quarter, which represents a significant increase to the $12 million and $15 million available at the beginning of the year. Further, we are excited to announce that concentrate sales resumed during the third quarter which represents our first sales in 2021. We are also happy to report that Avino is now debt free having made the final scheduled repayment to the $10 million term facility which was advanced by our partners at Samsung C&T. This step allows Avino to maintain significant financial flexibility in our next stage of growth as we look forward to move our new and existing projects forward. During Q3, we reported net revenues of $1.9 million with 107,000 silver equivalent ounces sold. Avino reported mine operating income of $0.8 million for the third quarter which includes $300,000 in depreciation and depletion. Earnings before interest taxes depreciation and amortization or EBITDA was $0.2 million compared to a loss of $4.6 million in Q3, 2020. Adjusted losses for Q3. 2021 with 700,000 with no significant changes from Q3 of 2020. We reported net losses after taxes and continuing operations of $200,000 or nil cents per share for the third quarter, compared to a loss of $4.6 million or $0.05 per share in Q3, 2020. Capital expenditures for the first nine months of 2021 were $2.1 million with the majority…

Thank you, Nathan. Q3 was very busy with all the projects ongoing and recommencing operations at the Avino mine. There's a lot to look forward to during the final quarter of this year. Production continues to ramp up at Avino. Training is ongoing, waiting for additional assays to be received. Work is already underway to determine how best to integrate La Preciosa into Avino’s production operations. Given the proximity to the current processing facilities and infrastructure. We expect a large portion of existing La Preciosa’s resource could be mined via underground operations to potentially improve the Avino’s production and organic growth profile. The dry stack tailings project is ongoing well, and with long lead items onsite now prefab building to be erected soon. With the concrete having already been poured. Improvements to circuit for ongoing that will improve gold and silver recovery through the use of new equipment. Avino’s main focus for the next quarter is to ramp up the production levels and operating activities at the mine. Keeping moving forward with the exploration program, as well as plans for integration of La Preciosa. The closing of the transaction is expected to occur during the first quarter of 2022. We were very pleased with the progress made in Q3 and look forward to a busy Q4. We'd now like to move the call to the question and answer portion. Operator?

Thank you. . We will pause for a moment as callers join the queue. The first question comes from Heiko Ihle with H.C. Wainwright. Please go ahead.

Hey, David thanks for taking my questions. Can you hear me all right?

Yes.

Sure thanks.

Wonderful.

Well in your release, you mentioned in those -- the coal mining activities continue to ramp up and management expects to reach previous production levels during Q4, ‘21 or Q1 ‘22. Just thinking out loud here, we're essentially halfway through Q4 and especially sort of one considers that the holiday seasons coming up in less than a month and a half. So my question is this, are the bottlenecks and other-- what exactly are the bottlenecks and the other capacity constraints that you're currently dealing with during this ramp up? What are you seeing what's -- you from the ground?

Yes, thanks, Heiko. Thanks for the question. This is Peter Latta here. Just to address that, I mean, the main bottleneck as David mentioned on the call is, is just training up the locals. And that's kind of a strategic move for us to really strengthen the local community. What we're seeing on the ground, though, is kind of an increased rate of production, that kind of a steady increase as we continue to ramp up from Q3 into Q4. And what we're seeing on the ground is that the local community is really excited to be back at work. And, there's a big stack of resumes that we have in the HR office there and we're just being very strategic with how we hire and train so that we can have a labor force as long as the future that’s wants to collaborate with us.

Fair enough. Slightly different question. You drill about 5,000 meters in Q3 years report, as per your prepared remarks, and also the press release, given the La Preciosa’s acquisition and the fact that you mentioned the exploration upside at that site, in your prepared remarks as well? Should we expect to see a meaningful impact on Q1 drilling expenses after a transaction actually closes? And on that same token, is there an assay bottlenecks that you might see with those drilling results? And could that become a setback or rather an opportunity once these things improve properly?

Hi, Heiko, David, here. The budgets for next year haven't been finalized yet. So we'll let you know when that's ready. So I'm not sure if we'll see meaningful exploration in Q1 just yet. What was the other question?

Well, I get the other question was building on it with the assays the delay that you are seeing?

Well, the last time we put on an exploration news release was in July, so just so you know, how long it's taken to get more into assays. So we're not sitting on and we're waiting. So they're trickling in. And so yes, they're really busy.

Okay, then I apologize in advance, because I'm going to take a third question on this call.

Okay.

Now what you're saying is, is assays really have come back at such a slow rate, that it hasn't made sense to put up a press release with results? Did I understand that correctly?

Yes, Heiko, Peter here again. The assays have-- they are trickling in. But we keep in mind, we need to add interpretation to that as well. So we'll drill a few holes, and we'll get an assay result for let's say, half the amount of holes, but that doesn't tell the story. So we need essentially, all of the assays in and we've been drilling kind of consistently as well. And then we have to apply interpretation with our geologists into that as well, before we before we release just the raw numbers and they bounced around the property to three or four different veins.

That's crazy. Okay, I'll get back in queue. Thank you.

Thank you.

The next question comes from Joseph Reagor with Roth Capital Partners. Please go ahead.

Hey, David and team thanks for taking my questions.

Hey, Joe.

Hey. So I guess first thing, La Preciosa’s obviously, haven't even closed the deal yet. So I realize there might not be a specific answer to this. But once you do close the transaction, what would be the timeline until you guys were able to provide a construction decision or a construction plan to the market, I realized you're going to have to do some work when you get at first, but what does that look like?

Yes, when we close, we want to consider some infill drilling on Gloria and Abundancia, because the majority of drilling in the past has been a Martha. And our goal is to bring Gloria and Abundancia into production first because it's near surface. So Carlos is putting together a drill plan for that. He said in order to permit it's probably 8 months to 10 months. There are underground workings on site. So we'll save a lot of money on development. We'll have to slash it out to put bigger equipment in there and prepare a proper mine plan. We've modeled 500 tonens per day to start, but it's hard to say exactly when that will start. But yes, I mean, that's .

Okay. So a little infill drilling and then 8 months to 10 months for permitting. Okay, fair enough. And then…

Just to add on that, Joe, sorry, sorry to cut you off there. But just to add on that, there's a bunch of optimization work that we're doing in the meantime as well. So David mentioned, that the 500 tonne per day scenario that we're looking at, but, in the interim, we're looking at a variety of different scenarios to do that optimization, depending on circuit configuration or how many tonnes we think we can haul out based on the mine plan that we're coming up with.

Okay, fair enough. And then kind of a question on Q3, you guys produced just shy of 300,000 silver equivalent ounces and only sold a little over 100,000. So call it, 35%, 40% of production is -- I’m assuming that we just inventory build-up as you ramp up. But should we expect further inventory ramp up increases in Q4 or do you guys think that now you've got enough like finished goods, concentrated supply on hand, that production and sales should match up pretty closely?

Hey, Joe, Nathan here. Yes, I mean, you've got to nailed it -- nailed it right in the head. We're kind of built a decent amount of inventory. And so you can expect more sales obviously for October, November and December, and we're going through that process right now. And again, it should be fairly even probably for Q4 as far as production versus sales.

Okay. All right, that helps. And then one final thing post-acquisition obviously the balance sheet will be a little lighter. Do you think you'll be comfortable with the amount of cash you have on hand at that point or do you think there's going to be some form of additional capital need to develop La Preciosa at the end of that drilling and permitting cycle?

Yes, Joe, Nathan, again, it's a good question. I think, we're generating cash flow, as you can see, just from the ones that we did have in September, and that's continuing into Q4, especially at these elevated prices from pre-COVID Productions. At this time, we're considering all options, but there's no -- there's not an internal requirement to go raise any capital, especially in the equity markets, we're going to consider all options as far as funding the development of La Preciosa plus we have obviously the development potentially the Oxide Tailings resource too. So we're kind of looking at the those two big projects as our next -- the next stage of growth for us. And we have not concluded on how best to fund those but as far as right now, we're generating cash flow and that's something we're comfortable with for the next couple quarters.

Okay, and one final thing if I can, what's the -- comfortability with your long-term tailings options, with adding La Preciosa Seattle, a lot of potential production tonnes. So therefore, you're going to add a lot of tailings tonnes as well. What are your thoughts there? Do you guys feel comfortable with the current plan, are you going to need to build another tailings facility eventually, if you were -- would it be built over on the La Preciosa land or on the Avino land?

We've been considering this. So we're going to have 8 to 10 years of capacity in TSF #2 using dry stack, we still have the open pit and various other pits to backfill, which will add another few million tonnes of capacity. And now with the acquisition of La Preciosa so we'll have more land, so we can consider moving TSF #1, if we're going to do agglomeration, heat bleaching Merrill-Crowe we might do it over on their land and that area would become available again. TSF #1 and that would be a decade or so as well. So we'll have lots of tailings capacity, we've got lots of water, we'll be reclaiming the water. We've got a million cubic meter dam and a well, an excess electricity capacity. So looking further, several years down the road, we're going to do an optimization study on how we can boost production even further to what we have now.

Great. I'll turn it over. Thanks.

Thank you.

The next question comes from Jake Sekelsky with Alliance Global Partners. Please go ahead.

Hey, guys, thanks for taking my questions.

Good morning, Jacob.

So just looking at CapEx of just over $2 million year-to-date, obviously that may have been affected by the shutdown on the first half of the year. Are you able to provide any color on what we should expect for next year even just ballpark figures?

Hey, Jake, Nathan here. Hard to give you kind of an accurate number. As David mentioned, we're going through the budgeting process. And then our entire management team is going down the site actually over the next coming weeks to finalize that. We do plan to continue the exploration program, obviously, we're about halfway through kind of that 30,000 meters that we were -- we had announced, and we're hoping to do. We're happy that most of the -- most if not all, the Oxide Tailing drilling is done so we know that expense -- there'll be minimal expenses, they're moving forward. A lot of the payments on the dry stack are starting to trickle in for Q4 and will continue into Q1 and Q2 as we look to finalize that in the first half of next year. And then additional upgrades in there. We're going to upgrade our fleet a little bit more for the guys at site. The automation, yes, we're working on the automation project. Some of that's been paid, some of that is going to be paid in the coming quarter. So rounding all that out, I can't give you an exact number. But I would expect that with a $1 million we spent in Q3, and we're expecting , between a $1 million and $2 million next quarter, that kind of that -- does that trend kind of continues, I think that gives you a bit of a range for what to expect for 2022. Other than, the tailings project, we don't have any huge capital expenditures coming up or any giant sustaining capital expenditures. Obviously, I'll caveat that with our plans La Preciosa. But I don't know if that gives you a little bit of a picture without saying a number. Is that helpful?

Yes, no, that's, that's helpful. And then La Preciosa I know, you've kind of talked about some of the low hanging fruit in -- initial targets that you guys have there once the acquisition closes. I’m just kind of curious -- I'm assuming there are active drill permits in place right now. And then how quickly do you think we could see drills turning once the acquisition closes? I mean, is it -- if the acquisition closes in Q1? Can you get personnel on site and get drills turning by Q2 or is it more of a mid-year type to that?

In the first have some time, I couldn't estimate at this particular moment. But it shouldn't take long?

Got it. Okay. And then just lastly, with the base metal prices, where they are, and obviously you have some copper rich areas at the Avino mine, that you're mining, have there been any thoughts into maybe hedging out some copper exposure just to lock in margin while remaining fully exposed to silver prices?

Yes, Jake, Nathan, here, that's obviously a topical question, something we've been toying around with. Because copper didn't make up a meaningful amount of production at Avino. And we do like having a bit of that exposure. But having said that, obviously, we don't want to risk at all. So we're looking at options on that. And we know kind of, we're looking out to 2022, and kind of looking at what the forecasts are for copper. And it's very mixed right now. But there is kind of some sentiment to a downward trend. So I think we're kind of exploring that avenue, at least on a portion of our copper sales.

Fair enough. Okay, that's all for me. Thanks, guys.

The next question comes from Matthew O'Keefe, with Cantor Fitzgerald. Please go ahead.

Thanks, operator. Good morning. Yes, most of my questions have been answered. Just a couple of quick housekeeping things here. Just David, did you say -- did you provide guidance for 2022 production? Would did I miss that?

We're anticipating between 2.5 million to 3 million ounces of silver equivalent.

Okay, thanks. All right I thought that's good. And then just another thing on the paying back to Samsung. So you're basically debt free now? Do you have a revolver or anything in place or do you need that? Are you are you fine that way?

Hey, Matt, Nathan here. Again, something we're exploring, obviously, it's nice to have something on stand-by. And that's something we're going to look at into 2022. We're in a great position as far as being debt free other than just payable. So I -- we're not looking to run out to the markets and take something on but I think we're going to -- we're looking at the flexibility options, especially as we have these, the Oxide Tailings and La Preciosa some long-term development projects for Avino.

Okay. That makes sense. Thanks. And then I think this might have been asked but on the exploration side, did we anticipate some more information or results before the end of the year. We're still at the waiting for assays?

Hi, Matt. Yes, Peter here. Yes, we are still waiting for the full assay so that we can provide some interpretation with that as well.

Right.

So you'll see something before the end of the year.

Okay, great. That's it for me. Thanks.

Okay. Thanks.

This concludes the question answer session. I would now like to turn the conference back over to David Wolfin, President and CEO for any closing remarks.

Thank you. I would just like to say that things are looking busy for Q4 and beyond. We are excited about the acquisition of La Preciosa. And we're going to be busy marketing and getting the word out about the growth of Avino. And that's it. We wish you all a great day. Thanks for calling in.

This concludes today's conference call. You may disconnect your lines. Thank you for participating. And have a pleasant day.