Torex Gold Resources (TSE:TXG) said its Morelos operation remained on track to meet full-year production guidance after a second quarter that reflected planned mining of lower-grade and lower-recovery stopes. The company produced just over 96,000 gold equivalent ounces in the quarter, bringing year-to-date production to about 197,000 gold equivalent ounces.
President and CEO Andrew Snowden, speaking on his first results call since assuming the role following Jody Kuzenko’s retirement, said the company expects the second quarter to be its lowest production period of 2026. Higher-grade mining areas are expected to support increased output in the third and fourth quarters.
Costs Rise Despite Strong Cash Generation
Second-quarter all-in sustaining costs were $2,459 per ounce, elevated in part by lower production during the period. Year-to-date all-in sustaining costs were $2,165 per ounce. Despite the higher costs, the company reported an all-in sustaining margin of 46% and free cash flow of $94 million for the quarter.
Torex revised its full-year all-in sustaining cost guidance to $2,000 to $2,100 per ounce from its previous range of $1,750 to $1,850 per ounce. The revised guidance incorporates updated full-year assumed prices of $4,500 per ounce for gold, $72.50 per ounce for silver and $6 per pound for copper.
Chief Financial Officer Dan Rollins said higher reagent consumption and pricing represented the largest contributor to the increase in cost guidance. Consumption rates accounted for approximately $100 per ounce of the impact, while higher reagent pricing added about $30 per ounce. A stronger Mexican peso added about $70 per ounce, according to Rollins, as roughly half of Torex’s operating costs are peso-denominated.
The company also cited a combined $40-per-ounce effect from higher mining volumes and lower gold recoveries, as well as a $30-per-ounce impact from higher sustaining capital expenditures. Sustaining capital guidance was raised to $135 million to $145 million, primarily reflecting the stronger peso and additional equipment leases at Media Luna.
Torex expects cyanide consumption to remain around 6.5 kilograms per tonne through the second half of 2026. Management said it is pursuing measures intended to reduce consumption, including adding lead nitrate to the leach circuit, adding another MACH Reactor and using a new geometallurgical model. Rollins said improvements in consumption rates are expected to be more visible in 2027 if the initiatives prove successful.
Production and Processing Performance
Mining rates during the second quarter exceeded expectations at both mines, averaging 7,700 tonnes per day at Media Luna and nearly 3,100 tonnes per day at ELG. Torex expects those rates to remain near current levels for the rest of the year.
Processing throughput averaged nearly 10,800 tonnes per day, above the operation’s design level. Copper and silver recoveries improved meaningfully in the quarter, while gold recovery, though better than in the prior quarter, remained slightly below the 90% target in the technical report. Gold recovery reached about 88% in July, Snowden said.
The company continues to target full-year production of 420,000 to 470,000 ounces.
Capital Returns and Liquidity
Torex returned $55 million to shareholders in the second quarter, comprising $11 million in dividends and $44 million in share repurchases. Year-to-date capital returns totaled $176 million, or about half of the company’s stated full-year target of $350 million.
Its cash balance increased to $169 million at quarter-end from $130 million, despite the shareholder returns and $39 million in annual Mexican profit-sharing payments made during the period. Torex ended the quarter with no debt and more than $500 million in available liquidity.
During the quarter, the company extended its undrawn credit facility by one year to June 2030. The facility also includes a $200 million accordion feature. Management said it expects income-tax installments to average approximately $55 million in each of the third and fourth quarters and expects stronger production, costs and metal prices to support free cash flow in the second half.
Media Luna North and Exploration Plans
Media Luna North remains on schedule for first production by the end of 2026. Torex completed breakthrough of the North End adit in June, enabling installation of ventilation fans, and also completed a 1-kilometre haulage drift connecting the deposit to the existing Media Luna ore-handling system.
Remaining work includes installing the ventilation system and an underground distribution system for paste. Snowden said the company is also considering opportunities to increase processing capacity. Engineering work on a potential debottlenecking program is expected to be completed in September and could support up to a 10% throughput increase, potentially beginning in mid-2027. A larger expansion to approximately 14,000 tonnes per day could be available around late 2028 if the company elects to proceed after reviewing the business case in the first quarter of next year.
At Los Reyes, Torex has started work on a pre-feasibility study expected in late 2027. Four drill rigs are active, with 20,000 metres of drilling planned for 2026. The company also increased its overall exploration budget to $85 million from $77 million, including more than 13,000 additional metres of drilling east and south of Media Luna. Torex expects to provide an updated mineral reserves and resources estimate in March 2027.
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.
