Gold and Silver Producer Has Significant Oversubscription
Research Report

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Disclosures for VSA Capital, Sierra Madre Gold and Silver Ltd., July 17, 2025

Investment Analyst Certification In our roles as Research Analysts for VSA Capital Limited, we hereby certify that the views about the companies and their securities discussed in this report are accurately expressed and that we have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report. Non-Independent Research This is a marketing communication. It is non-independent research as it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. 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Definition of Ratings VSA Capital Limited uses the following stock rating system to describe its equity recommendations. Investors should carefully read the definitions of all ratings used in each research report. In addition, since the research report contains more complete information concerning the analyst’s views, investors should carefully read the entire research report and not infer its contents from the rating alone. In any case, ratings (or research) should not be used or relied upon as investment advice. An investor’s decision to buy or sell a stock or investment fund should depend on individual circumstances and other considerations. VSA Capital Limited’s recommendations are defined as follows: BUY:The stock is expected to increase by in excess of 10% in absolute terms over the next twelve months. HOLD: The price of the stock is expected to move in a range between -10% and +10% in absolute terms over the next twelve months. SELL: The stock is expected to decrease by in excess of 10% in absolute terms over the next twelve months. In addition, on occasion, if the stock has the potential to increase by in excess of 10%, but on qualitative grounds rather than quantitative, a SPECULATIVE BUY may be used. Distribution of VSA Capital Limited’s Equities Recommendations VSA Capital Limited must disclose in each research report the percentage of all securities rated by the member to which the member would assign a “BUY”, “HOLD, or “SELL” rating, and also the proportion of relevant investments in each category issued by the issuers to which the firm supplied investment banking services during the previous twelve months. The said ratings are updated on a quarterly basis. Equities breakdown: 17/07/25 Spec. BUY BUY HOLD SELL Overall equities coverage 9% 91% 0.0% 0.0% Companies to which VSA has supplied investment banking services 100% 100% 0.0% 0.0%

On July 17, 2025, VSA Capital published a morning report maintaining a Buy recommendation on Sierra Madre Gold and Silver Ltd. (SM:TSX.V; SMDRF:OTCQX) with a CA$1.40 per share target price, representing 100% upside from the share price at the time of the report of CA$0.70.

The analyst cited the company's successful, heavily oversubscribed placement enabling accelerated growth plans and exploration of the wider license area following proven profitable operations at La Guitarra.

Sierra Madre Gold & Silver Ltd. completed a heavily oversubscribed placement, launching the deal at CA$10 million with final aggregate proceeds of CA$16.5 million at a unit price of CA$0.70 per share with a half warrant at CA$0.85 per share expiring after 12 months.

The significant oversubscription demonstrates strong investor confidence in the company's growth trajectory and operational achievements, according to the report.

Operational Performance and Profitability

Over the past 12 months, Sierra Madre has successfully restarted operations at La Guitarra, generating a net profit in the first quarter of 2025. The company has proven that the mine can be operated profitably at commercial rates, providing the foundation for accelerated expansion plans.

Current processing capacity stands at 520 tonnes per day, with the mine having previously operated at higher run rates as a brownfield site.

Accelerated Expansion Timeline

The capital raise will enable the company to accelerate growth plans significantly ahead of schedule. An initial expansion to 640 tonnes per day from the current 520 tonnes per day can be achieved this year, followed by a further step up to 1,000 tonnes per day in 2026. VSA Capital noted that "previously, a decision to expand was only expected to be made next year at the earliest," highlighting the acceleration of the development timeline.

The analyst emphasized that "as a brownfield site which has previously operated at higher run rates, the capex requirement is modest" and the raise will fund plant upgrades and enable the purchase of additional equipment. The additional funds will also enable operational expense optimization through initiatives such as acquiring rather than leasing equipment.

Infrastructure and Environmental Improvements

The raise will enable construction of a paste backfill plant enabling underground backfill storage of tailings. This development will increase available capacity for tailings while management explores longer-term options for waste management.

The infrastructure investment demonstrates the company's commitment to sustainable mining practices and operational efficiency.

Exploration Potential and Resource Expansion

Due to the upsizing of the capital raise, the company may be able to commence exploration of the wider license area, particularly the Eastern District. VSA Capital highlighted that "59km of veins have been mapped in this area with six vein systems identified." Historic resource estimates based on limited work indicate grades exceeding 600 grams per tonne silver with gold credits of up to 4 grams per tonne gold.

The analyst believes that exploration will "enable SM to demonstrate the wider potential that could ultimately demonstrate mine life extensions and the optionality to expand processing capacity further justifying a stronger valuation."

Market Conditions and Precious Metals Rally

The timing of the expansion aligns favorably with precious metals market conditions, as the silver price rally has gained momentum, recently breaking through US$39 per ounce.

VSA Capital noted that "accelerating the ramp up to take advantage of the rise in precious metals prices is a positive decision which we believe will bring forward stronger cash flow generation for only modest capex."

Production Projections and Financial Modeling

The analyst's model indicates that a 1,000-tonne-per-day capacity could deliver production of over 1 million ounces of silver and up to 10,000 ounces of gold annually.

However, the model requires updates to reflect faster development timelines, as this capacity was previously assumed to be achieved only from 2029, as well as accounting for additional cash and shares from the recent raise.