# Sierra Madre Gold and Silver Ltd. Q2 2026 MD&A

Source Brief: https://evesgoldminers.com/research/source-briefs/sierra-madre-gold-and-silver-ltd-2026-06-30-sierra-madre-gold-and-silver-ltd-q2-2-3fcf07a6
Original source: https://sierramadregoldandsilver.com/presentations/SML%20-%20Q2%202026%20-%20MDA%20-%2026-08-26%20-%20Final.pdf
Original published: 2026-06-30
EGM generated: 2026-09-27
Company: Sierra Madre Gold and Silver Ltd. (SM)

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# Sierra Madre Gold and Silver Ltd. Q2 2026 MD&A

Source: https://sierramadregoldandsilver.com/presentations/SML%20-%20Q2%202026%20-%20MDA%20-%2026-08-26%20-%20Final.pdf
Published: 2026-06-30T00:00:00+00:00
Fetched: 2026-09-12T08:15:37.268+00:00
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# Sierra Madre Gold and Silver Ltd. Q2 2026 MD&A
Source: https://sierramadregoldandsilver.com/presentations/SML%20-%20Q2%202026%20-%20MDA%20-%2026-08-26%20-%20Final.pdf
Published: 2026-06-30
SIERRA MADRE GOLD AND SILVER LTD.
Management
s Discussion and Analysis
of the Financial Position and Results of Operations
for the Three and Six Months Ended June 30, 2026
August 25, 2026
To Our Shareholders
Sierra Madre Gold and Silver Ltd. (
Sierra Madre
or the
Company
) is a mineral extraction and exploration
company incorporated in British Columbia, Canada, listed on the TSX Venture Exchange under the ticker symbol
under the symbol
on the OTCQX Best Market, and under the symbol 409 on the Frankfurt Stock
Exchange. The Company owns the Guitarra silver-gold mine (the
Guitarra mine
Guitarra
) and related
exploration concessions located in the historic Temascaltepec mining district in the state of M
xico, M
xico, the Del
Toro silver mine, located in Chalchihuites, in the State of Zacatecas, M
xico, and the Tepic silver-gold property
located in the State of Nayarit, M
This Interim Management
s Discussion and Analysis (
) is dated and effective August 25, 2026, and provides
information on the Company
s activities for the three and six months ended June 30, 2026 (
respectively), and subsequent activity to the date of this report. Consequently, this MD&A should be read in
conjunction with the Company
s June 30, 2026 condensed consolidated interim financial statements, prepared in
accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board (
applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting. This
MD&A should also be read in conjunction with the audited consolidated financial statements of the Company as at
and for the year ended December 31, 2025, prepared in accordance with IFRS, and available for viewing at
www.sedarplus.ca.
All amounts herein are expressed in U.S. dollars, unless otherwise stated in Canadian dollars (
) or Mexican
pesos (
Overall Performance and Outlook
Highlights of the Company
s activities during the period under review are presented as follows:
- In June 2026, the Company completed the acquisition of the Del Toro silver mine from First Majestic Silver
Corp. (
First Majestic
) and completed a concurrent financing (the
Concurrent Financing
) for gross
proceeds of CAD$57.5 million (see Acquisition of the Del Toro Silver Mine);
- As at June 30, 2026, our cash balance totalled $22.2 million and our working capital (i) was $25.0 million;
- Net revenues for the quarter increased by 43% to $8.23 million as compared to $5.76 million in Q2 2025;
- Income before taxes of $603 thousand in the quarter compared to $443 thousand in Q2 2025;
- After-tax income was $37 thousand or $0.00 per share for the current quarter as compared to $276 thousand
or $0.00 per share in Q2 2025;
- The Company averaged $75.65 per silver (
) ounce sold and $4,529 per gold (
) ounce sold in the
quarter, which compares to $33.36 per Ag ounce sold and $3,272 per Au ounce sold in Q2 2025;
- Cash costs for H1 2026 were $48.65 per silver equivalent (
) ounce (i) produced, as compared to
$24.69 per AgEq oz produced in H1 2025, due to a number of factors including the US$-MXN exchange rate
and ramp up of operations at Coloso and Nazareno (see Operational Highlights);
- Adjusted EBITDA (i) of $3.5 million for H1 2026 compares to $2.6 million for H1 2025;
- During H1 2026, the Company sold 135,697 ounces of silver and 1,981 ounces of gold or 252,627 silver
equivalent ounces, based on the ratio of silver and gold prices realized for each shipment in the quarter. This
compares to 139,419 ounces of Ag and 2,118 ounces of Au or 338,655 AgEq ounces sold in H1 2025;
- The Company generated $1.89 million of cash from operating activities in H1 2026 as compared to $1.37
million in H1 2025;
- In 2025, the Company initiated a plan to expand production capacity at Guitarra in a two-phase program.
Completion of the first phase (
Phase I
) was anticipated by the end of Q2 2026, with the aim to increase our
nameplate capacity from 500 tonnes per day (
) to a range of 750-800 tpd. During the search for the
required mill for Phase I, the Company located and purchased a larger-than-planned mill, with the expectation
1
that it would meet the milling requirements for both phases of the expansion. The additional foundation and
electrical work for the larger mill, along with certain shipping delays for other components of the Phase I
expansion, extended the planned completion of Phase I. We now anticipate that the increased production
capacity will be achieved prior to the end of Q3 2026. The purchase of the larger mill puts the milling portion
of our second phase (
Phase II
) ahead of schedule (see Mineral Interests);
- Modifications to the existing 7-foot x 10-foot ball mill were made and larger capacity pumps were installed
on the cyclone system to increase milling capacity. This has resulted in an increase in the total existing mill
circuit throughput capacity with daily production reaching as high as 672 t/d, a 35% increase over the prior
500 tpd capacity (see Mineral Interests);
- Completion of Phase II is anticipated by Q3 2027, with the aim of increasing the capacity to a range of 1,200-
1,500 tpd. As part of the planned expansion, the Company has acquired a significant amount of surface and
underground equipment (see Mineral Interests);
- Construction of the thickener tank was completed in mid-August 2026, and testing of the mechanical and
electrical circuits is currently underway. Full functionality is expected by the end of September (see Mineral
Interests);
- The Company has completed the installation of two 1,500 kW back-up diesel generators, which are
anticipated to be sufficient to cover power needs for the plant in the case of power grid outages.
- In late April 2026, a special services contractor was selected to provide both equipment and manpower to
accelerate mine development and production from the Coloso and Nazareno mines. The special contractor
began mobilization to site in early May 2026 and began operations in mid-June (see Mineral Interests);
- In October 2025, the Company announced a $3.50 million exploration program at the East District of the
Guitarra mine complex and to date drilling permits have been obtained and a drilling contractor has been
selected and a contract is in progress (see Mineral Interests); and
- Recently, the Company elected to proceed with construction of the permitted dry stack tailings storage facility
(
) located to the south-west of the processing plant. Clearing of the trees and vegetation is scheduled
to begin in October, the normal end of the rainy season. The initial construction phases of the TSF have been
redesigned in order to reduce costs compared to the original First Majestic design. In addition to the TSF, a
filter plant will be constructed in due course. As planned, a second thickener tank will be needed for the
Phase II production expansion (see Mineral Interests).
(i) The Company reports non-GAAP measures, which include Cash Cost of Production per Tonne, Cash Cost per AgEq ounce
produced, All-in Sustaining Cash Cost per AgEq ounce produced, Average Realized Price per AgEq ounce sold, Adjusted
EBITDA, and working capital. These measures are widely used in the mining industry as a benchmark for performance, but do
not have standardized meanings and may differ from methods used by other companies with similar descriptions. See
Non-GAAP
and Other Financial Measures
section below for definitions and reconciliations to GAAP measures.
The Company continues to be pleased with the positive results of commercial production at Guitarra since its restart
in mid-2024. The team at the mine continues to fine-tune its activities and to ramp-up operations at Coloso and
Nazareno and to expand our staffing in anticipation of the increase in production when Phase I of our current expansion
plan is completed.
The mill continues to operate at its current nameplate capacity, and the Company looks forward to continued
improvements in the mining and milling processes as new mining faces are accessed and new equipment is added to
the operation.
The mine experienced significant power outages and resulting downtime during 2025. The Company has acquired a
1,250-kilowatt (
) back-up diesel generator for use at Coloso and Nazareno and installation is underway. The
Company has also acquired two 1,500 kW back-up diesel generators, which we anticipate will be sufficient to cover
our power needs for the plant in the case of power grid outages. Excavation and groundwork at the plant site began in
late May 2026. Installation of the Guitarra mine generators and support electrical equipment was completed in mid-
August. Full functionality is expected during September. Once the diesel back-up generators are installed and
commissioned, we anticipate fewer production interruptions.
The Company anticipates increased production from the recent re-start of operations at Coloso and Nazareno as the
mine development proceeds, de-watering continues, and progress is made towards the higher-grade areas.
2
Acquisition of the Del Toro Silver Mine
On December 17, 2025, the Company signed a share purchase agreement (
) to acquire 100% of the issued
shares of First Majestic Del Toro, S.A de C.V. (
Del Toro
), which holds a 100% interest in the Del Toro silver mine
in Mexico (the
Transaction
) from First Majestic. The acquisition received shareholder approval and all regulatory
approvals, and the transaction closed on June 19, 2026. The Del Toro concessions are subject to a 2% net smelter
royalty and certain other royalty agreements.
The SPA provides for the Company to make the following payments and contingent payments to First Majestic:
- upon closing, the Company completed a cash payment of $20 million and issued 10,870,000 common shares
with a fair value of $13.2 million;
- within 18 months of closing, the Company must make a payment of $10 million in cash or, at the option of
the Company, shares at market price, subject to a maximum of 10,575,385 shares provided that if the
aggregate deemed valued based on the market price of the maximum number of shares does not equal $10
million, the remaining balance will be paid in cash. The Company estimated the fair value of this obligation
at approximately $9.2 million using a discount rate of 5.36% and will accrete the discounted amount up to
$10.0 million over the 18-month period;
- contingent upon the Company completing a compliant technical report within 48 months of closing,
demonstrating a mineral resource of a minimum of 100 million silver equivalent ounces, a payment of $10
million, in cash or, at the option of the Company, shares at market price, subject to a maximum of 10,575,385
shares provided that if the aggregate deemed valued based on the market price of the maximum number of
shares does not equal $10 million, the remaining balance will be paid in cash;
- contingent upon the Company achieving commercial production averaging 4,000 tonnes per day within 60
months of closing, a payment of $10 million, in cash or, at the option of the Company, shares at market price,
subject to a maximum of 10,575,385 shares provided that if the aggregate deemed valued based on the market
price of the maximum number of shares does not equal $10 million, the remaining balance will be paid in
cash;
- the Company has estimated the fair value of the two contingent payments above at approximately $2.0 million
based on certain assumptions and will periodically

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