Torex Gold Targets Growth, C$350M Returns and Morelos Expansion

Key Points

• Capital returns: Torex expects to generate about C$600 million in free cash flow in 2026 and plans to return C$350 million to shareholders through dividends and share buybacks.
• Morelos growth: The Morelos complex is expected to produce nearly 450,000 ounces this year, with Media Luna North coming online in December. Debottlenecking and a potential plant expansion could raise throughput and production by roughly 10% and 35%, respectively.
• Expansion pipeline: Torex is advancing the Los Reyes project in Mexico toward targeted production in 2031, while continuing exploration at five assets and pursuing a New York Stock Exchange listing.

Torex Gold Resources TSE: TXG outlined plans to build on production from its Morelos property in Mexico, advance the Los Reyes development project and return capital to shareholders as it seeks to close what it described as a valuation gap.

During a company presentation, Andrew, a Torex speaker, said the company’s strategy rests on “strong execution, visible growth, and disciplined capital allocation.” He said Torex expects to generate about C$600 million in free cash flow this year at current spot prices and plans to use that cash flow for growth investments and shareholder returns.

The company said it expects to return C$350 million to shareholders this year through dividends and share buybacks. The program, initially announced in November and increased in May, includes a dividend yield of about 1%, according to the presentation.

Morelos Production and Expansion Plans

Torex’s flagship Morelos property in Guerrero State, Mexico, is expected to produce close to 450,000 ounces this year. The company said the asset has a 10-year mine life at an annual production rate of about 450,000 ounces, while providing additional opportunities to extend mine life and increase output.

The company completed construction of the Media Luna underground mine, its second underground operation at Morelos, a year ago. Andrew said Media Luna reached design levels in the first quarter, a year ahead of schedule.

Torex is spending a record C$50 million on drilling this year at Morelos, including work at the ELG and Media Luna underground mines and across the Media Luna cluster. The company recently reported drilling results pointing to a potential mineralized area known as the San Miguel Corridor, extending from Media Luna South to Media Luna East.

Andrew said Torex could increase spending on the corridor next year and drill it from west to east. If drilling progresses as planned, the company could declare an inaugural resource for the area in the first quarter of 2028. He said the corridor’s proximity to Media Luna could allow the company to connect any future resource to existing infrastructure, including the Guajes Tunnel and material-handling systems.

Torex also expects first ore from Media Luna North, which would become its third underground mine at the Morelos property, in December. The company said the new mine would shift Morelos from being mine-constrained to plant-constrained, creating additional options for higher production.

• A debottlenecking project could increase processing throughput and production by about 10% with approximately C$10 million of capital investment.
• Torex said benefits from the debottlenecking work could begin as early as late 2027.
• A separate plant-expansion study is evaluating an increase in throughput to 14,500 tonnes per day, or about 35% above current throughput.
• The larger expansion is expected to cost about C$100 million, with a potential decision in the first half of next year.

Second-Half Production Expected to Improve

Torex produced about 200,000 ounces during the first half of 2026 and expects output to rise significantly during the second half, driven by higher grades, Andrew said. The company’s first-half mine plan included more lower-grade secondary stopes because its paste plant, commissioned after coming online in September of the prior year, limited mining flexibility.

With additional stopes now backfilled, Torex expects to mine higher-grade areas in the second half. Andrew said third-quarter performance was tracking to plan and that the company was comfortable producing around the midpoint of its 2026 guidance.

Los Reyes and Exploration Pipeline

Beyond Morelos, Torex is advancing the Los Reyes gold-silver development project in Sinaloa. A preliminary economic assessment issued in July outlined a potential 14-year mine life, with production of 161,000 ounces annually during the first 11 years, estimated all-in sustaining costs of C$1,600 per ounce and C$550 million in capital required to bring the project online.

The company has started a pre-feasibility study that it expects to release in the second half of next year. A feasibility study is planned for 2028, followed by a two-year construction period in 2029 and 2030. Torex said it is targeting production at Los Reyes by 2031.

Torex also has five exploration assets, including Griffin and Medicine Springs in Nevada, and three properties in northern Mexico. The company said it is drilling at four of the five projects this year and will advance them based on results and their ability to compete for capital within its portfolio.

Andrew said Torex is applying for a New York Stock Exchange listing and expects the process to be completed in the coming months. He also said the company has received more permits in Mexico over the past 12 months than in the preceding eight years, describing the permitting environment as improving.

About Torex Gold Resources (TSE:TXG)

Torex Gold Resources Inc is a Canadian mining company engaged in the exploration, development, and production of gold, copper, and silver from its flagship Morelos Complex in Guerrero, which is currently Mexico's largest single gold producer.

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