Battered Vizsla keeps ‘long-term’ commitment to Mexican project

Vizsla Silver (TSX, NYSE: VZLA) said it remains determined to develop the Panuco silver-gold project in Mexico’s strife-torn Sinaloa state after an armed group kidnapped 10 company workers, killing at least five of them.

Five of the kidnapped employees remain unaccounted for, almost three weeks after their abduction, Vancouver-based Vizsla said Thursday in a statement. Authorities in Sinaloa said this week they had found 10 bodies in a clandestine grave, though the Mexican attorney general’s office said it had only identified five of them, local media reported.

“This is an incredibly painful time for the families of our colleagues, for our team and for the community of Concordia,” CEO Michael Konnert said in Thursday’s statement.

“We are taking the steps necessary to navigate this period responsibly,” he added. “We will continue to support the affected families and our team, remain fully engaged with the relevant authorities, and ensure safety continues to guide all decisions. At the same time, we remain committed to safeguarding the long-term value and strength of Vizsla Silver to benefit all stakeholders and the community of Concordia.”

Remote engineering

The workers were abducted Jan. 23 by members of a criminal group as they were traveling from the camp where they lived in the city of Concordia to their work at the mine, about 15 km away, Mexican media reported last weekend. The victims included engineers and technical personnel working for Vizsla, El Financiero said.

Vizsla shares fell 0.6% to C$5.21 Thursday morning in Toronto, giving the miner a market value of about $1.75 billion ($1.3 billion). The stock has lost about 44% of its value since Jan. 28, the last trading day before the company disclosed the kidnappings.

Vancouver-based Vizsla said work on Panuco is continuing even as site operations remain suspended. Much of the project’s near-term advancement is engineering-based and can be conducted remotely.

Vizsla “remains committed to responsibly developing the Panuco district over the long term and maintaining its investment in the community of Concordia,” it stressed.

Armed conflict

For months now, Sinaloa has been caught up in an armed conflict between rival factions of the namesake drug cartel. This has led to a surge in homicides.

Mexico’s government sent more than 1,000 troops to Sinaloa to try to locate the missing miners, Reuters reported this week. The deployment included elite marines.

“The magnitude and breadth of the government’s response are aimed at protecting lives, as well as upholding the country’s reputation and the viability of the mining industry in Sinaloa, and, in our view, serves as a deterrent to recurrence,” National Bank Financial mining analyst Don DeMarco said in a note Tuesday. He predicted that the heavy military, surveillance and police presence would continue “indefinitely.”

Security review

Besides cooperating with Mexican authorities as their investigation and search continues, Vizsla said it’s “thoroughly reviewing” the circumstances surrounding recent tragic events.

Vizsla said it operates in compliance with applicable Mexican and Canadian laws while maintaining a “zero-tolerance approach” toward bribery, corruption, extortion and any form of unlawful or unethical conduct.

Employee and contractor safety and security remain a top priority, Vizsla also said. Since inception, the company says it has made significant investments in security and risk management, with active leadership oversight including regular site visits.

Key project

Panuco hosts the world’s largest undeveloped, high‑grade silver resource. It’s the cornerstone of Vizsla’s goal of reaching production of 50 million silver-equivalent oz. by 2035.

The company has been saying it wants production at Panuco to start in the second half of 2027. With permitting and project financing efforts advancing, it’s targeting a construction decision as soon as it has received the required approvals – probably in this year’s second half.

Following the kidnappings, Vizsla will probably “take a step back to assess the security situation, better understand the motives, if possible, and work with the government to implement a security protocol to mitigate risk to all parties involved,” analyst DeMarco wrote.

DeMarco said he expects the mine’s startup to be pushed back until early 2030 “to allow time for a fulsome investigation, implementation of security and monitoring programs, a potentially extended hiring period and to allow volatility in Sinaloa to moderate.”

Higher costs

Panuco holds 12.8 million proven and probable tonnes grading 2.01 grams gold per tonne and 249 grams silver for contained metal of 829,000 oz. gold and 102.7 million oz. silver, according to a 2024 resource.

Vizsla is projecting a mine life of 9.4 years for Panuco. The operation is expected to produce 17.4 million silver-equivalent oz. a year over the life of the project at an all-in sustaining cost of $10.61 per silver-equivalent ounce. This includes more than 20 million silver-equivalent oz. annually during the underground mine’s first five years.

All-in sustaining costs could be as much as $5 per tonne higher because of increased security expenses, labour escalation and inflation, DeMarco said.