Gold and Silver Co. Upgraded Following Del Toro Acquisition
Research Report

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Disclosures for VSA Capital, Sierra Madre Gold and Silver, February 2, 2026

Investment Analyst Certification In my role as a Research Analyst for VSA Capital Limited, I hereby certify that the views about the companies and their securities discussed in this report are accurately expressed and that I 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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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 m ember 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: 02/02/2026 BUY SPEC BUY HOLD SELL Overall equities coverage 88% 13% 0% 0% Companies to which VSA has supplied investment banking services 100% 100% n/a n/a Recommendation and Target Price History Valuation basis Our valuation of SM is based on an EV/Resource multiple derived from a group of silver peers. Risks to that valuation Commodity prices, political risk, macro risk, execution risk, financing risk. This recommendation was first published 10 July 2023

In a research note dated February 2, 2026, analyst Oliver O'Donnell of VSA Capital reiterated a Buy rating on Sierra Madre Gold and Silver Ltd. (SM:TSX.V; SMDRF:OTCQX) and upgraded the target price to CA$3.00 per share from the previous level.

The upgrade follows the company's completion of a CA$57.5 million fundraise in conjunction with the conditional acquisition of the Del Toro silver mine from First Majestic Silver Corp. (AG:TSX; AG:NYSE; FMV:FSE).

Del Toro Acquisition Details

Sierra Madre has conditionally acquired the Del Toro Mine in the Chalchihuites District of Zacatecas, Mexico, for total consideration of up to US$60 million. The transaction structure includes US$20 million in cash and US$10 million in Sierra Madre shares at closing, with up to US$30 million in deferred and contingent payments that may be settled in equity at Sierra Madre's election.

First Majestic developed Del Toro from 2006, achieving first production in 2011 before placing the mine on care and maintenance in early 2020 due to low silver prices. During its operational period, the mine produced over 10 million ounces of silver equivalent. The mothballed processing plant has a nameplate capacity of 3,000 tonnes per day, while historic resources across all categories total 21 million ounces of silver equivalent. 

The analyst notes that the addition of Del Toro diversifies Sierra Madre's asset base and offers the potential to replicate the value creation strategy at La Guitarra, which was acquired for US$35 million in 2023.

Financial Outlook and Earnings Upgrades

VSA Capital has significantly upgraded its forecasts, highlighting Sierra Madre's leverage to rising precious metals prices. The firm expects EBITDA to increase eleven-fold year-over-year to US$62 million in 2026, based on projected production of 2.84 million ounces of silver equivalent.

The analyst has raised silver price assumptions substantially, with the 2026 forecast increasing to US$95 per ounce from US$56 previously — a 70% increase that drives an 82% improvement in projected 2026 EBITDA. Gold price assumptions for 2026 have also been raised to US$5,250 per ounce from US$4,250.

Key forecast metrics include:

• 2026F Revenue: US$87.6 million (up from US$56.0 million previously)
• 2026F EBITDA: US$61.6 million (up from US$33.8 million)
• 2026F Net Income: US$37.3 million (up from US$19.5 million)
• 2026F Free Cash Flow: US$44.5 million

Valuation and Market Position

With a strengthened balance sheet showing just US$5 million in debt and forecast year-end cash of US$41 million, Sierra Madre trades at a forward EV/EBITDA of 8.6x compared to a peer average of 9.8x. On an EV/Resource basis, the company now trades at US$9.12 per ounce, up from US$5.18 per ounce at the firm's third-quarter update.

The analyst's sensitivity analysis indicates that the recent intraday share price peak of CA$3.20 implied long-term silver price assumptions below US$45 per ounce, suggesting room for further upside if precious metals prices remain elevated.

Del Toro is incorporated into the valuation using an EV/ounce methodology, with peers trading at approximately US$14 per ounce. The implied value for Del Toro in VSA's approach is approximately US$105 million, closely aligned with the acquisition value.

Exploration Potential

Management intends to conduct a significant drilling campaign at Del Toro to determine an optimized mine plan. While First Majestic focused on vein-hosted mineralization during its ownership, the property contains multiple styles of mineralization, including chimneys, breccias, and mantos that remain undeveloped with limited drilling.

The transaction includes milestone payments tied to achieving a 100 million ounce silver equivalent resource within 48 months — a threshold the analyst notes both parties believe is achievable. The current resource offers approximately six years of mine life as a starting point.

Investment Summary

At the current share price of CA$2.35 at the time of the report, Sierra Madre offers 28% upside to VSA Capital's CA$3.00 target price. The stock has risen 343% over the past twelve months, with a twelve-month high of CA$3.09. First Majestic Silver holds a 27.53% stake in the company.

The analyst concludes that with earnings growth and exploration activities at two assets, significant catalysts exist to support the current valuation and test new highs as the precious metals bull market progresses.