¶ Intro / Opening
Hello, welcome to Kitco Mining with me, Paul Harris, here at the 2026 PDAC in Toronto and Canada. We are talking about precious metals exploration in Mexico and a great pleasure to be joined by Jim McDonald, president and CEO of Coute Silver, which trades on the TSX V under the ticket KTN. Jim, welcome back to Kitco. Yeah, it's good to be back, Paul. Since we last spoke, you've been hitting the drills, you've been putting out some great drilling results.
Some big step outs there, and you're hitting grade such as 10 meters at 503 grams per ton silver plus lead plus zinc. A great start to this particular campaign, Jim. What's going on there and what are you looking to do with this campaign?
Well, expand on that 54 million ounces. That was the maiden resource we put out mid-year last year in 25. Great start. Really important is the width width of the veins we're seeing, five to six meters wide and average, but really great width for underground mining. All of the resource zones that we've defined are open to expansion.
So this program is is very focused and simple in that it's a grid pattern of drilling, just stepping out a hundred meters at a time, which is big step outs and veins, to find the limits of what we already have. So looking to expand what's there, it's open-ended. We need to find first find the edges of what we already know. After that, we'll start to get into exploring those veins that maybe have a few holes but no resource to find yet.
And then again, then after that, veins that don't even have any drilling in them at all. So the majority of this 50,000 meters is going into expanding the 54 million ounces of silver that are defined
¶ Targeting 100Moz Silver at Columba
already because those zones are open-ended.
Do you have a target, Jim, in terms of, you know, with this these step outs, this expansion drilling, that you want to get the resource from 54 million ounces to X million ounces, fingers crossed.
Yeah, our expectation is to be able to get this to 100 million or maybe some multiple of that. The size, physical size of the system is such that you can easily host 100 million ounces or some multiple of that. And the other interesting feature of this geologically is it's barely suffered any erosion. We've the low the lowest points at topography on that property have just barely exposed the top parts of the veins.
So higher in elevation, your veins start to disappear, they're preserved underneath. So there's a tremendous amount of upside potential here. Exiting this program, we want to have an update on the resource, and we want that, of course, to be quite a significant update, and our aim is to get it to 100 million, whether it's on this round or the next, and get it to a size that will justify then a PEA. So we need a certain mass that you need to get to to make pay for a capital bill.
Because once we get enough ounces, because we have the grade and we have the width,
¶ Path Toward a Columba PEA
and once we get enough ounces, we can start down that economic assessment path.
Absolutely. The 100 million ounces, that's typically the sort of rule of thumb, isn't it? Because that's potentially 10 million ounces of silver for 10 years. That's a good place to start. How easy is it to sort of build the tonnage on the veins when when you hit them? How easy is it to define them?
Well, I mean in this case we've now got established veins and structures that we understand really well from the drilling. The zones are all open, so this phase is pretty simple, just stepping out at 100 meters. When you're stepping out at a hundred meters, you're you're adding a lot of tonnage. That's a big step out on veins. So it now it's a matter of drilling.
¶ La Cigarra PEA Timeline
At this stage, it's a matter of drilling and step out.
Okay. Um you mentioned the PEA that that's gonna be coming at Colombo at some point in the future. You're also um undertaking a PEA, a preliminary economic assessment at the La Sagara uh deposit, which is also in Chihuahua. How is that advancing and what will that potentially look like as and when you complete that study?
Yeah, so we we have four different deposits. And uh Colomba's been our flagship deposit the last four years because of the grades and the widths we're seeing, it's the kind of thing that can work at any price. But we have three other deposits that we had sitting on the shelf. We updated all the 43101 reports on them in the last uh 24 months or so in anticipation of a uh a silver bull market. Now we're in it.
So now it's time to start advancing some of these projects because at 20 something silver it didn't really look that great. Above 30, they start to look really interesting. So now is the time to move them. So the first of those that we're getting to is La Cigara. It's got uh 51 million ounces M and I and another 11 in the inferred in an open pit shell, uh, wide open for expansion as well. So a tremendous upside in this project, but it's already all the work is there to do a PA.
We've launched the PA. We should see that by um well, it's gonna be in the second quarter, probably May, June of the second quarter when that comes out. So we want to position the company such that assuming that we get a positive result in that PA, we we want to now be transitioning ourselves into an explorer developer as opposed to an explorer only building ounces. Explorer developer now, and then that and start down the path of feasibility in that project and
¶ Silver Price Assumptions for PEA
turning us into a developer and get a re-rating on all our ounces. Okay.
Now, Jim, you mentioned uh the project starts looking really good at $30 per ounce silver. Obviously, we're well above that at the moment. We're it's 80s, maybe 90s as we sit here today. Uh the silver price has been much higher at the start of the year, it's been quite volatile.
What are your thoughts on the pricing you're going to use in the PEA at La Siga to both show its potential, capture the value, but also obviously you need to remain cautious uh and uh prudent as you're looking to advance a project towards that development moment.
Yeah, well it's it's uh interesting to have to pick a silver price when it's recently hit 120. Now we've we've pulled back and consolidated, but there's there's regulatory guidelines on that, and there's there are industry standards for for that, and it is use it a three-year trailing average. So a three-year trailing average is around $38, $40 ish at the moment. So that's what we'll use. But the silver still trading in the $90 level, it kind of doesn't make a lot of sense at the same time.
So you always put out a sensitivity table of lower price, a couple of lower prices, what it looks like, and then you look at some higher prices, and then you can also uh publish a
¶ Treasury Position and Warrants
number of what the spot would be when you uh when you publish.
Okay. The the company is well funded. You recently raised another 18 million Canadian dollars. What does that uh bring your Treasury up to?
Yeah, so we're just uh right around 38 million uh Canadian right now in the Treasury, and we have uh warrants that are coming due in April and May that have the potential to bring in another 11.5 million dollars approximately, and they sit
¶ Expanding Drill Programs and Spending
at $1.40 and $1.58.
Okay. Um with the you know, you've got sounds like you've got more than enough cash to do the work programs you want to do this year, both in terms of the drilling at Colomba and executing the PEA on La Cigara. With the excess cash there, um you're just gonna hold that as cash balance to fund things in perhaps 2027. Are there certain things you can perhaps accelerate using that additional cash this year?
Yeah, well we've added uh 10,000 meters to that 50. So we've actually expanded the Colomba program to 60,000 meters. Uh later in the year we'll do a drilling program at La Seguera because there's a gap zone within the resource that could add a significant number of ounces that'll come after the PA, in fact. And so some of that capital will go towards those two things.
Uh once we have the PEA results from La Seguera, then we'll have some decisions to make and we may be going down the path of feasibility then and applying some of those funds to that. Then with regards to Columba, uh we publish an updated resource uh around the end of the year, beginning of the new year, and then we'll be making decisions. Well, do we have enough now to go to PEA and continue drilling and expanding at the same time? So those those decisions will be made sequentially as we go.
Uh in the meanwhile, we'll also be looking at the last the remaining two deposits we have, La Negra and Promontorio, and evaluating them, doing some internal evaluation on what at what price as silver do they really start to look interesting, and what work can we do at this moment to start advancing them.
Is that something you might pick up work on this year, or again, is that something more for 2026?
Well, we may do a little uh something on those projects this year. There's some metallurgical things that we can investigate that could really benefit the promontorio, for example, and actually pretty low budget stuff uh could really change the the what how you think of the project. So we'll do we'll do some things like that that could add a lot of, there's small things, but they can add a lot of benefit. We'll be doing that this year. And then the the answers we get from that kind
¶ Shareholder Marketing Strategy
of work will tell us what we're going to do for for 27.
Okay. Now you mentioned you've got, I think you said 38 million warrants that are due in April and May.
You recently announced you have we have 38 million cash, and we and we have 11.5 million dollars more in warrants that are expiring April and May.
Thank you for that uh correction. Um you announced uh a couple of weeks ago that you're gonna do a one million dollar Canadian uh internet marketing and advertising um um and program marketing program there. Is is that to sort of support the share price as you go into that uh warrant exercise period to so that they will exercise hopefully?
Yeah, so it it it's uh it's it's just that it's designed for that, but it's also divine designed to get a much broader reach. Uh a lot of retail shareholders would that will get out of that week with a modest success, uh 3,000 to 5,000 new shareholders would be uh modest success, would be happy with that. But also uh those warrants that are expiring, it's around eight and a half million uh in shares. So we need to absorb that and redistribute that as well. So it's kind of a double purpose.
It's timed for that, but also beyond those warrants, it'll give us a broader base of shareholders, more support, and hopefully start solidifying that stock pricing, moving it up.
You you did a couple of similar programs in in 2025. Did they achieve the results that you anticipated?
Yeah, oh yeah, absolutely they did. Because we can track these programs in real time. There's pro where we can see the buying and where it's coming from. And so in those programs, we were able to immediately see if they were having impact. And and they and they did. And they helped bring in like the last six months, we've taken in approximately seven million dollars uh of warrants in. And so that was a big help in getting that in
¶ Mexico Security and Operating Risk
and creating extra liquidity that was needed for that new stock.
Well, congratulations. Now um I want to hopefully this isn't too much of a sound, but uh obviously Mexico's had some challenges uh, particularly as related to the the resource sector as 2026 has got underway. How has that uh has has that had any impact on investor appetite for exploration stories in Mexico?
Well, not so far because the the uh actually this the stance uh the negative sort of stance that AMLO had has been softened by the current administration. So there's been improvements, there's there's been uh permits issued, there's positive advances with regards to that. Uh then more recent uh news uh about violence in Mexico and that sort of thing is it's always concerning, but that's something that we've had to deal with in Mexico for the 25 years that we've been there.
Uh all our staff is uh Mexican, excepting for one uh Argentine geologist. So we really understand what's going on in the ground. We only operate in areas that are secure and safe to operate in. If we've seen some wonderful projects that are that we we're interested in, but we just haven't pursued them if they're in a dangerous area. So that's how you best deal with those situations. So the areas we are in are are quite calm and and uh safe. Okay.
But did did that cause you to perhaps review your security protocols, review the the way you operate, how you operate in well in general?
Yeah, we cut it we constantly look at that and we're very aware of that. We've got certain rules that we follow. Um in recent activity we just went back and reviewed it again, said okay, what is there something a little more we can do? Uh if there's the um
¶ Key Catalysts for 2026
and make changes as necessary.
Okay, well let's get back onto uh more positive things, Jim. You you've got a lot going on. Why don't you give us a recap of what the key catalysts for 2026 will be so our viewers can watch out for those?
Yeah, okay, so it's gonna be a whole lot of drilling on Columba. We just put out some results where there'll be so steady results coming out for the next several months, right through the end of the year and maybe a little bit beyond. A resource update at the end of all that drilling, a PEA on La Siguera, Q2, I'd say late Q2, mid to late. And then we'll be making the decision on what to do next.
There could be a whole lot of drilling, could be some more met work, it could be going right into feasibility on that project. So we won't have that answer till obviously till that study's in. So those are the big catalysts. The other two deposits, Promontory and La Negra, will be doing some internal studies and a little bit of uh low-cost work that could really benefit those and then decide what should be done with those.
So we've got a resource base of over 200 million ounces of pure silver, silver equivalents over 300 million. So we've got a tremendous asset base to work with in this kind of market, and as you see, we're moving a lot of things ahead now.
You're getting closer to those really exciting times and those really exciting decisions for uh Company Head. Yeah, yeah, absolutely.
This is a this is a great year. We've got the money to do it. It's uh it's uh going to be very, very exciting this year.
Well, I wish you the best of luck in the execution of those plans. I look forward to catching up with you a little bit later on this year to to find out how things go. Jim McDonald, thank you very much for joining me today. Thanks, Paul, appreciate it. And we have a lot more to come from the 2026 PDAC in Toronto in Canada. So stay tuned and hit that subscribe button. Oh, and incidentally, Coot and Lee Silver trades on the TSXB under the ticket KTN. I'm Paul Harris and this is Kitco Mining.