F-10/A: Avino Silver & Gold Mines Files Amended $100M Shelf Prospectus Amid Strong Q1 Production Growth

Avino Silver & Gold Mines Ltd. has filed an amended shelf prospectus to offer up to US$100 million in various securities, while reporting an 8% increase in Q1 2025 silver equivalent production driven by improved grades and a significant rise in net income.

Summary

• Avino Silver & Gold Mines Ltd. has filed an Amendment No. 1 to its Form F-10 Registration Statement, serving as a base shelf prospectus.
• This filing allows the company to offer and issue various securities, including Common Shares, Warrants, Subscription Receipts, Debt Securities, and Units, up to an aggregate initial offering price of US$100,000,000 over a 25-month period.
• The securities may be offered separately or in combination, at prices and terms determined by market conditions, and can also be used for the acquisition of other businesses, assets, or securities.
• For the first quarter ended March 31, 2025, the company reported silver equivalent production of 678,458 ounces, an 8% increase compared to Q1 2024.
• This production increase was primarily driven by improved grades in all three metals: silver, gold, and copper, despite a slightly lower mill throughput.
• Net income for Q1 2025 was US$5.6 million, a substantial increase from US$0.6 million in Q1 2024.
• For the full fiscal year ended December 31, 2024, the company reported a net income of US$8.1 million, up from US$0.5 million in 2023.
• As of May 23, 2025, Avino had 145,129,569 Common Shares issued and outstanding, along with 8,785,000 outstanding stock options and 3,265,000 outstanding Restricted Share Units (RSUs).
• The company's Common Shares are listed on the Toronto Stock Exchange (TSX) and NYSE American under the symbol ASM, and quoted on the Berlin and Frankfurt Stock Exchanges under GV6.
• Closing prices on May 23, 2025, were CDN$4.20 per share on TSX and US$3.06 per share on NYSE American.
• The company intends to use the net proceeds from securities sales for general working capital, further development and exploration of its Avino Property and La Preciosa Property in Mexico, including the potential funding of the Oxide Tailings Project which has an estimated initial capital cost of US$49.1 million, and for potential acquisitions of other mineral properties.
• Avino has not declared or paid dividends on its Common Shares and plans to retain earnings to finance business growth and development.

Sentiment

Score: 7

Explanation: The document presents a positive outlook with strong Q1 2025 production and net income growth, supported by a flexible US$100 million shelf offering for future growth initiatives. However, it also transparently details numerous inherent risks in the mining industry, including operational hazards, market volatility, and the lack of defined mineral reserves for its producing mines, balancing the positive news with necessary caution.

Positives

• Silver equivalent production increased by 8% to 678,458 ounces in Q1 2025 compared to Q1 2024.
• Improved grades were achieved across all three metals (silver, gold, and copper) in Q1 2025.
• All three metals (silver, gold, copper) saw increased production compared to Q1 2024.
• Net income for Q1 2025 significantly increased to US$5.6 million from US$0.6 million in Q1 2024.
• Net income for the fiscal year ended December 31, 2024, was US$8.1 million, a substantial improvement from US$0.5 million in 2023.
• The company reported sufficient net working capital of US$25 million, including approximately US$27 million in cash, as of December 31, 2024, to meet operating requirements for at least the next twelve months.
• The material weakness in internal control over financial reporting identified for fiscal year 2022 was remediated in 2023, and controls were deemed effective for 2023 and 2024.

Negatives

• Mill throughput was slightly lower in Q1 2025.
• There is currently no market through which Debt Securities, Warrants, or Units (other than Common Shares) may be sold, which could affect pricing, transparency, and liquidity.
• The company's current producing mine, the Avino Mine, does not have established mineral reserves, and production decisions were made without final feasibility studies, leading to increased uncertainty and risks.
• The company has a history of negative operating cash flow.
• A limited number of customers accounted for all of the company's revenues in 2024, with one customer representing over 50% of revenues, posing a concentration risk.
• The company has experienced four unrelated fatal accidents at the Avino Property over the past nine years, with the most recent occurring in April 2023.

Risks

• No active or liquid trading market may develop for Debt Securities, Warrants, or Units, affecting their pricing and liquidity.
• Market prices of precious metals and other minerals are volatile and unpredictable, potentially rendering operations uneconomic.
• Global pandemics and market conditions can cause volatility and disruption to supply chains, operations, and financial markets.
• Inaccuracies in production and cost estimates may occur due to variations in mineral resource estimates, ground conditions, equipment availability, labor, and metallurgical characteristics.
• Mineral resource estimates are imprecise and depend on geological interpretation and statistical inferences, which may prove unreliable.
• The absence of defined mineral reserves for the Avino Mine increases risks regarding anticipated production rates and costs.
• There is no assurance of future profitability, as mines have limited lives and require continuous replacement and expansion of mineral resources.
• Mineral exploration and development involve a high degree of risk, with few properties becoming producing mines.
• The marketability of minerals is affected by numerous factors beyond the company's control, including government regulations and market fluctuations.
• Obtaining regulatory and environmental approvals for mineral properties may be delayed or not granted, impacting development.
• Mining operations are subject to various risks, including fires, power outages, labor disruptions, industrial accidents, and environmental hazards, which may not be fully insurable.
• Failure to effectively maintain internal controls over financial reporting could lead to material misstatements and a decline in share price.
• The resource industry is intensely competitive, potentially affecting the company's ability to acquire suitable properties.
• Title to mineral properties may be defective due to errors, omissions, prior unregistered agreements, or native land claims.
• Unauthorized mining (lupios) in Mexico poses risks of losses, operational disruption, and safety issues.
• Commercialization risk exists for development and exploration stage properties, and there is no assurance of acquiring additional commercially mineable mineral rights.
• Recruiting and retaining qualified personnel is critical, and a shortage could adversely affect operations.
• The company's ability to obtain equity and/or debt financing for exploitation, development, and exploration is not assured, especially in volatile markets.
• Political instabilities and changes in government regulations in Mexico and Canada, including tax laws and royalties, could adversely affect the business.
• Compliance with foreign corrupt practices legislation (FCPA, CFPOA) and transparency measures (ESTMA) carries risks of sanctions for violations.
• Future equity financings, stock options, and RSU issuances will result in further dilution to existing shareholders.
• Conflicts of interest may arise for directors and officers involved in other business activities.
• Concentration of customers and limited smelter availability/capacity pose risks to revenue and operations.
• Transportation of concentrate carries risks including theft, roadblocks, adverse weather, and environmental liabilities.
• Acquisition strategy involves risks such as failure to select appropriate candidates, negotiate terms, finance, integrate, or assess value.
• Community relations and social license to operate are critical, and public concern or NGO criticism could negatively impact reputation and financial condition.
• Trading prices of the company's securities may fluctuate due to factors beyond its control, including broad market and industry factors.
• Shareholder activism could result in substantial costs, diversion of management attention, and reputational damage.
• Decommissioning and reclamation costs are significant and subject to change, potentially impacting future cash flows.
• Enforcement of civil liabilities against non-U.S. persons may be difficult for U.S. investors.
• Credit and counterparty risk relates primarily to cash, trade receivables, and value-added tax refunds.
• Liquidity risk exists if the company cannot meet financial obligations, especially with a sudden decrease in silver prices or unforeseen liabilities.
• Certain risks, such as specific environmental hazards or unexpected geological conditions, may not be insurable.
• Fluctuations in the price of consumed commodities (e.g., diesel, electricity, chemicals) can adversely impact operating costs.
• Fluctuations in foreign currency exchange rates (Mexican peso and Canadian dollar against the U.S. dollar) can affect operating and capital expenditures and financial results.

Future Outlook

Avino Silver & Gold Mines Ltd. intends to use the proceeds from its US$100 million shelf offering for general working capital, further development and exploration of its Avino and La Preciosa properties in Mexico, including the Oxide Tailings Project, and potential acquisitions of other advanced mineral properties. The company's mission is to create shareholder value through profitable organic growth at the Avino Property, continued development of La Preciosa, and strategic acquisitions. Near-term objectives include maintaining and improving profitable mining operations at the Avino Mine, continuing mine expansion drilling, exploring regional targets, and funding exploration and development of La Preciosa. The company does not anticipate paying dividends in the near future, preferring to retain earnings for business growth.

Management Comments

• "The Corporation is committed to expanding its operations and managing all business activities in an environmentally responsible and cost-effective manner while contributing to the well-being of the communities in which we operate."
• "The Corporation believes that these deaths [fatal accidents] were attributed to such persons failing to comply with the Corporations safety procedures, but no assurance can be given that further injuries will not occur at the Corporations mining properties."
• "The Corporation considers health and safety of its workers, and others in the communities in which it operates, to be a top priority. In this regard, the Corporation is continually seeking to minimize the risk of safety incidents."
• "The Corporation believes it has sufficient net working capital to meet operating requirements as they arise for at least the next twelve months."

Industry Context

The mining sector, including precious metals, is subject to significant volatility influenced by global financial market instability, trade wars, tariffs, and geopolitical events. Access to financing for mining companies can be negatively impacted by liquidity constraints. Metal prices are affected by international economic and political trends, inflation expectations, currency fluctuations, interest rates, and speculative activities. The Mexican mining industry faces specific challenges such as unauthorized mining. Environmental legislation is becoming stricter, imposing higher compliance costs and penalties.

Corporate Governance

Stakeholder Impact

• Shareholders face potential dilution from future equity financings, stock options, and RSU issuances, but also potential value creation from successful growth initiatives.
• Employees are subject to safety risks, as evidenced by past fatal accidents, and the company's ability to recruit and retain qualified personnel is crucial for operations.
• Customers are concentrated, with one customer accounting for over 50% of revenues in 2024, posing a risk if relationships are not maintained or alternative buyers are not secured.
• Local communities are impacted by mining activities, and maintaining strong community relations and social license to operate is critical for the company's ongoing success.
• Creditors and investors face liquidity risk if the company cannot meet financial obligations, particularly if commodity prices decline or unforeseen liabilities arise.

Next Steps

• Issuance of specific Prospectus Supplements for future securities offerings.
• Further development and exploration of the Avino Property and La Preciosa Property in Mexico.
• Potential funding and development of the Oxide Tailings Project.
• Assessment and potential acquisition of other advanced exploration and development stage mineral properties.
• Continued exploration on the company's other existing mineral properties.
• Maintain and improve profitable mining operations and achieve efficiencies at the Avino Mine.
• Continue mine expansion drilling and explore regional targets on the Avino Property.

Key Dates

Recommendation

Keywords

Silver mining, Gold mining, Copper mining, Mineral exploration, SEC filing, Shelf prospectus, Securities offering, Avino Silver & Gold Mines, ASM, Precious metals, Mexico mining, Corporate finance, Resource development