Discovery Silver Q1 Earnings Call Highlights

Key Points

• Discovery Silver said it remains on track for its 2026 guidance despite a first quarter that management described as the expected low point of the year. Lower processed tonnes were partly offset by stronger grades and recoveries, and the company expects production and unit costs to improve in the second half.
• Higher gold prices boosted first-quarter financial results, with revenue up 4% to $285 million and EBITDA jumping 41% to $178 million. Discovery also reported $81.7 million in net income, $130 million in adjusted operating cash flow, and ended the quarter with $384.9 million in cash plus access to a credit facility.
• The pending Kidd acquisition could significantly expand processing capacity in Timmins, with management evaluating a plan that could unlock 7 million to 9 million tonnes per year of new gold processing capacity. Discovery is also advancing exploration across its Timmins assets and continuing work on the Cordero silver project in Mexico.

Discovery Silver TSE: DSV said it remains on track with its 2026 guidance after a first quarter marked by lower gold production, higher gold prices, continued investment at Porcupine and progress on a proposed acquisition that management said could unlock significant processing capacity in Timmins.

On the company’s first-quarter 2026 conference call, Mark Utting, senior vice president of investor relations, said Discovery is working toward more than doubling gold production at Porcupine to more than 500,000 ounces per year while also advancing the Cordero project in Mexico, where it expects to produce about 14 million ounces of silver annually over at least the first 10 years.

“We plan to achieve these levels of performance while averaging in the lowest half of the global cost curve for both gold and silver,” Utting said, adding that the company is taking a disciplined approach to investment and investor returns.

First-quarter production was expected to be the low point of 2026

Discovery produced 60,269 ounces of gold in the first quarter, with total gold poured of 59,258 ounces, according to Pierre Rocque, chief operating officer. Utting said the company had previously indicated that 2026 production would be weighted to the second half of the year and that the first quarter would likely be the lowest production period of the year.

The company processed 698,000 tonnes during the quarter. Rocque said the reduction in tonnes processed from the prior quarter was largely expected, reflecting scheduled maintenance and the impact of severe winter conditions on the Dome Mill crushing circuit. He said more than three-quarters of the reduction was planned or related to those winter conditions.

Management said the quarter included stronger grades, particularly from Hoyle Pond, where the average grade exceeded 12 grams per tonne. Rocque said the impact of lower processed tonnes was partly offset by a 15% improvement in average grade and a higher average recovery rate. Total ore tonnes mined increased 4% from the fourth quarter, and Discovery ended the period with nearly 1.3 million tonnes of stockpiled material available for processing.

During operating days, Rocque said the Dome Mill showed improved performance, exceeding 11,000 tonnes per day on 26 days in the quarter and exceeding its operating capacity of 12,000 tonnes per day on 10 days.

Management said it expects higher production and improved unit costs in the second half of 2026. Utting said the company remains on track to achieve all of its 2026 guidance.

Financial results benefited from higher gold prices

Chief Financial Officer Alison White said first-quarter revenue totaled $285 million, up 4% from the previous quarter, primarily due to higher average gold prices. EBITDA rose 41% from the fourth quarter of 2025 to $178 million.

Operating cash costs averaged $1,417 per ounce sold, while all-in sustaining costs averaged $2,041 per ounce sold. White said unit costs are expected to be highest in the first half of the year and improve as production and sales volumes increase and the company realizes benefits from investments to optimize operations.

Discovery reported net income of $81.7 million, up 25% from the fourth quarter of 2025. Earnings per share and adjusted earnings per share were both $0.10. White said the increase reflected the absence of a one-time $45 million reclamation expense recorded in the prior quarter, as well as higher revenue and lower depreciation and depletion expense, partly offset by income tax expense and higher share-based compensation costs.

The company generated adjusted operating cash flow of $130 million and adjusted free cash flow of $63 million. White said adjusted free cash flow reflected an $87 million adjustment for a payment made during the quarter to satisfy the company’s 2025 income tax obligation. In response to an analyst question, she said Discovery is paying monthly tax installments in 2026 and that the 2025 payment was largely a one-time event because last year was the company’s first partial year of operation.

Discovery ended the quarter with $384.9 million in cash. White also pointed to a $250 million revolving credit facility with a $100 million accordion feature, saying the company has “meaningful financial flexibility.”

Kidd acquisition expected to expand processing options

Management highlighted the pending acquisition of the Kidd operations in Timmins, announced March 2, as a key development. Utting said the transaction was expected to close “very soon,” likely within the next few weeks. President and CEO Tony Makuch later said the company was working through final closing steps and expected the deal to close before month-end, while noting that timing could still change.

Utting said the Kidd Met Site could help Discovery dramatically expand processing capacity and process different ore types. He also cited added infrastructure for future expansion of Hoyle Pond and Pamour, including development of the TVZ zone, exposure to copper, zinc and silver through Kidd Creek, additional exploration potential, cost synergies and the addition of a skilled workforce.

Makuch said the company is evaluating a conceptual plan that could unlock 7 million to 9 million tonnes per year of new gold processing capacity at the Kidd Met Site. That includes a potential 5 million to 7 million tonne-per-year conventional gold circuit and use of existing circuits for Borden ores and refractory ores such as TVZ.

Makuch said Discovery is studying whether it can process Borden ores through Kidd’s C division within the next six to 12 months, potentially freeing 2,000 to 3,000 tonnes per day of capacity at the Dome Mill. In response to a question, he said this could occur between September of this year and March of next year, depending on test work and execution.

Exploration remains active across Timmins assets

Eric Kallio, senior vice president of exploration, said Discovery drilled another 67,000 meters during the quarter, with work focused on operating mines and growth projects.

At Hoyle Pond, Kallio said drilling continued to produce positive results in the lower S Zone, including holes with visible gold and high grades directly down plunge, along with indications of potential new high-grade lenses to the west. At TVZ, he said drilling is being conducted to support a maiden resource estimate later this year, with three drills active across multiple levels and additional results expected.

Kallio also pointed to continued drilling success at Owl Creek, Borden, Pamour and Dome. At Pamour, he said drilling at Pamour West and the North Contact Zone is not included in the current resource estimate, and the company will work to incorporate that material in its next update later this year.

In Mexico, José Jabalera, senior vice president of corporate affairs and sustainability, said Discovery continues to advance Cordero, including studies on water and power. He said the company has met with senior Mexican authorities and that a site visit was scheduled as part of the final evaluation process for its MIA permit with SEMARNAT.

Makuch described the quarter as “fairly solid,” saying the mines outperformed the mill in terms of throughput and that Discovery is working to correct processing challenges. He said the Kidd acquisition, exploration results and ongoing investments support the company’s goal of exceeding 500,000 ounces of annual gold production.

About Discovery Silver TSE: DSV

Discovery Silver Corp is an exploration and development company building a large-scale, high-margin silver asset in Mexico. Its flagship project is the Cordero project, one of the few silver projects globally that offer margin, size, and scaleability. The project is located in a prolific mining belt in Chihuahua State, Mexico.

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