Precious Metals Co.'s Financial Results Beat Expectations
Research Report

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Disclosures for Atrium Research, Andean Precious Metals, August 13, 2025

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On August 13, 2025, Atrium Research analysts Ben Pirie and Nicholas Cortellucci maintained a Buy rating on Andean Precious Metals Corp. (APM:TSX; ANPMF:OTCQX) while raising the target price to CA$6.00 from CA$4.50, representing 36% upside from the current share price of CA$4.42.

The analysts cited second-quarter financial results that were "largely ahead of our expectations," driven by higher gold and silver prices and stellar cash flow performance.

Andean Precious Metals Inc. reported second-quarter 2025 revenue of US$73.7 million, up 6% year-over-year and significantly beating Atrium's estimate of US$64.7 million. The revenue outperformance was primarily driven by higher gold and silver prices compared to the analysts' modeling assumptions.

Adjusted EBITDA for the quarter reached US$28.9 million, representing a 39% margin and 68% year-over-year growth, substantially exceeding Atrium's estimate of US$17.0 million. Operating cash flow before working capital was US$26.7 million, up 47% year-over-year and well above the analysts' US$13.0 million estimate. Free cash flow totaled US$12.3 million compared to US$8.2 million in the second quarter of 2024.

Net income was US$17.4 million or US$0.12 per share on a basic basis, compared to US$9.4 million or US$0.06 per share in the prior year period. The company finished the quarter with US$87.3 million in cash and marketable securities against US$52.0 million in debt, representing a net cash position of US$35.3 million.

Golden Queen Operations

The Golden Queen mine in California generated US$39.0 million in revenue, down 3% year-over-year but exceeding Atrium's estimate of US$32.0 million. Operating income reached US$11.7 million, significantly outperforming the analysts' estimate of US$1.3 million. The mine processed 1.146 million tonnes of ore, up 14% year-over-year, producing 12.2 thousand ounces of gold equivalent, down 28% year-over-year.

Operating cash cost was US$1,717 per ounce, up 17% year-over-year, while all-in sustaining cost was US$2,245 per ounce, representing a 28% year-over-year increase. Management expects grades at Golden Queen to remain steady through the second half of 2025, with capital expenditures anticipated to decrease slightly in 2026 as major upgrades since the acquisition have been completed.

San Bartolome Performance

The San Bartolome facility in Bolivia posted US$34.8 million in revenue and US$13.2 million in operating income, compared to Atrium's estimates of US$32.7 million and US$10.6 million respectively. The facility processed 322 thousand tonnes of ore, up 18% year-over-year, producing 12.1 thousand ounces of gold equivalent, down 5% year-over-year.

Cash generation over metal was US$13.89 per ounce, while gross margin recovery per silver ounces sold was 46%. The company revised its guidance for San Bartolome's cash generation over metal to US$8.00-US$13.00 per silver equivalent ounce sold from the original US$6.50-US$8.40 range, and gross margin recovery to 35%-45% from 29%-36%.

Capital Allocation and Share Repurchases

During the first half of 2025, Andean repurchased 2.1 million shares at an average price of CA$1.42 per share, demonstrating management's commitment to returning capital to shareholders. The company paid off all amounts outstanding on its revolving credit facility, maintaining the US$25 million facility with zero balance for future flexibility.

Pirie and Cortellucci noted that "APM remains well-positioned to continue taking advantage of the elevated gold and silver prices, while redeploying its large net cash balance into accretive acquisitions," highlighting management's strong track record of successful mergers and acquisitions since founding the company.

Updated Valuation and Commodity Assumptions

The analysts increased their assumed gold price from US$2,700 per ounce to US$3,000 per ounce to better reflect the current market environment. Their model now projects US$83.5 million in operating cash flow for 2025, to which they apply a 7.0x multiple (increased from 6.5x), reflecting improving valuations across the precious metals sector.

The CA$6.00 target price equates to 5.0x 2025 estimated EBITDA, an 8.5% free cash flow yield, and 7.7x 2025 estimated earnings. This valuation represents a discount to metals processing peers at 5.5x 2025 estimated EBITDA and small/mid-cap producers at 8.2x 2025 estimated EBITDA.

Production Outlook and Strategic Position

Management confirmed production remains on track to increase quarter over quarter, with the fourth quarter expected to be the largest. The company is working on initiatives to reduce production variability, but still expects some volatility in 2026. All other guidance metrics remain unchanged from previous projections.

The company benefits from strong management alignment with CEO Alberto Morales owning 53% of shares and bringing over 30 years of merger and acquisition experience, while Eric Sprott holds 15% of shares. The analysts emphasized that "APM's stock exhibits a 1.3x beta to silver and a 2.4x beta to gold, offering investors strong exposure to rising metal prices."

With 151.3 million fully diluted shares outstanding and a market capitalization of US$485.6 million, Andean trades at attractive valuation multiples, including 3.6x 2025 estimated EV/EBITDA and 6.1x 2025 estimated price-to-earnings ratios, supporting the analysts' positive investment thesis.