30,000-Meter Drill Campaign Cleared to Begin After Key Mexican Permit Approval

1. Sierra Madre Gold and Silver Ltd. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$3,000 and US$6,000.
2. As of the date of this article, officers, contractors, shareholders, and/or employees of Streetwise Reports LLC (including members of their household) own securities of Sierra Madre Gold and Silver Ltd.  and First Majestic Silver Corp.
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1. Ownership and Share Structure Information

The information listed above was updated on the date this article was published and was compiled from information from the company and various other data providers.

Sierra Madre Gold and Silver Ltd. (SM:TSX.V; SMDRF:OTCQX) announced that it has received approval from SEMARNAT, Mexico's federal environmental permitting agency, to begin drilling in the East District of its La Guitarra Mine silver-gold complex. The permit covers 22 drill pads from which multiple holes can be drilled.

According to the company, a 3D model of the East District vein systems was developed using detailed surface mapping, accessible historic underground workings, historical data and maps. The first phase of the company's fully budgeted 30,000 meter drill program is designed to test up to 30 mapped vein systems.

Sierra Madre said it is currently receiving bids from multiple drill contractors for the first phase of the program and expects drilling to begin within 60 days after selecting a contractor.

Greg Liller, Chief Operating Officer, said in a company news release, "The exploration team has done a very thorough job of surface and underground mapping, locating and compiling old reports, maps and sections and developing a structural model. We were aware of multiple vein systems from the initial round of surface mapping in the East District, and now have a better understanding of the complex structural systems controlling mineralization."

He added, "This information has allowed us to build a 3D model, which will be used to guide the upcoming drill program."

The company said the 2023 NI 43-101 La Guitarra report contains an exploration potential estimate for five East District vein systems with a conceptual target ranging from 0.77 million tonnes to 1.54 million tonnes grading 2.4 to 3.6 g/t gold and 440 to 670 g/t silver across a combined strike length of 7.7 kilometers. The report states that the potential quantity and grade are conceptual in nature, there has been insufficient exploration to define a mineral resource, and it is uncertain whether further exploration will result in the target being delineated as a mineral resource.

The 2023 Mineral Resource Estimate also included an East District component at Mina de Agua containing an indicated resource of 761,000 tonnes grading 159 g/t silver and 0.19 g/t gold, along with an inferred resource of 545,000 tonnes grading 178 g/t silver and 0.13 g/t gold.

Initial drilling is planned from the Tlacotal area, where Sierra Madre said it owns the surface rights and is permitted for mining activities. The first seven drill holes are planned as sub-horizontal holes between 1,000 and 1,500 meters in length. Four holes from a single drill pad are designed to test the Magdalena vein system below historic workings, while three additional holes from separate pads will target veins that were previously mined at Los Locos. The company said assay results from those holes would be used to guide wedge drilling, infill drilling, and offset holes.

Sierra Madre also said discussions are underway to secure surface access in the Rincon mine area for a separate drill permit. Initial drilling there would consist of nine holes between 600 and 1,000 meters in length, designed to intersect multiple veins. A second round of drilling would be based on the results of those initial holes. The company added that drilling is also planned at the Inca and La Palma vein systems north of the Guitarra Mine, where permits have already been received.

Gold and Silver Prices React to Inflation and Oil Market Developments

Gold traded at US$4,042.84 per ounce as of 6:00 a.m. EDT on July 15, while silver traded at US$58.98 per ounce as of 6:01 a.m. EDT. According to live spot price data, gold and silver prices fluctuated based on "investment supply and demand, and other factors."

Reuters reported on July 15 that gold prices retreated after rising more than 2% during the previous session as higher oil prices contributed to inflation concerns and uncertainty surrounding the U.S. interest rate outlook. Spot gold traded at US$4,025.12 per ounce, while U.S. gold futures for August delivery were US$4,030.40 per ounce. Reuters noted that gold had climbed to US$4,100.49 per ounce the previous day after U.S. consumer inflation data for June came in below expectations.

Kelvin Wong, senior market analyst at OANDA, told Reuters, "I reckon that the market is now looking past the CPI data, which is kind of a lagging indication ... Trump continues to maintain the blockade of ships that is flowing out of the Strait of Hormuz, causing oil prices to rise and gold to come under pressure." Reuters also wrote that top Federal Reserve officials welcomed cooler June inflation figures but said they would need additional data before concluding that price pressures were easing.

Silver also moved lower during the session. Reuters reported that spot silver declined 0.8% to US$58.18 per ounce.

According to FXStreet on July 15, silver traded near US$58.50 per troy ounce during Asian trading after posting gains in the previous session. The publication wrote that "the price of the non-yielding white metal could rebound as softer-than-expected US inflation data fueled hopes that the US Federal Reserve (Fed) might adopt a less hawkish monetary stance."

FXStreet also reported that renewed U.S.-Iran tensions contributed to higher oil prices, which kept inflation concerns in focus. The publication wrote that Federal Reserve Chair Kevin Warsh "reiterated the central bank's commitment to restoring price stability" during congressional testimony while refraining from indicating a more aggressive policy stance. It also noted that the CME FedWatch Tool showed markets pricing in roughly a 50% probability of a Federal Reserve rate increase in September.

Analyst Reviewed First Quarter Results and Expansion Activities

Following Sierra Madre Gold & Silver's first-quarter 2026 results, VSA Capital analyst Oliver O'Donnell highlighted revenue of US$10.1 million, representing increases of 22% from the prior quarter and 109% year over year. In his May 19 research report, he attributed the performance primarily to stronger precious metals prices, writing that the company delivered "strong Q1 2026 financials largely due to higher silver and gold prices."

O'Donnell noted that adjusted EBITDA reached US$2.8 million during the quarter, which he said amounted to "47% of the full year 2025 total." He also discussed operating costs, stating that higher mining expenses were "significantly explained by a spend on the expansion (non-capitalized spend such as headcount) and additional contractors as well as inflationary pressure."

The analyst wrote that the first phase of Sierra Madre's mill expansion, which is designed to increase capacity to between 750 and 800 tonnes per day, remained "on track to complete in Q2." He also stated that the Coloso and Nazareno mines were expected to deliver higher grades through the remainder of 2026, describing them as "a significant contributor to the forecast earnings uplift."

Addressing operational performance, O'Donnell said mine development activities affected recovery rates during the quarter but added, "Recovery rates are expected to improve as development advances into higher-grade in-resource areas at both mines." He further stated that "Production over the balance of the year is expected to increase" as expansion work continues alongside higher grades and improved recoveries.

Regarding costs, O'Donnell wrote that spending reflected workforce additions, mine ramp-up activities, and contractor costs. He added that "the cost base for higher production is somewhat in place and we expect unit costs to fall through the year."

VSA Capital maintained its Buy rating on Sierra Madre Gold & Silver and raised its target price to CA$2.70 per share. O'Donnell described quarterly EBITDA of US$2.8 million and operating cash flow of US$3.5 million as "a significant achievement." He also wrote, "With rising capacity, expected higher grades and a strong pricing outlook, we anticipate US$53m in EBITDA for 2026, highlighting the significant impact of the low-cost expansion and the company's gearing to pricing," concluding, "We reiterate our BUY Recommendation and adjust our target."

Drill Program and Expansion Timeline

According to the company's June 2026 corporate presentation, the East District program represents the first phase of a planned 30,000-meter drill campaign at La Guitarra, with drilling at the East District concessions scheduled to begin during the second half of 2026.

The presentation also outlines a two-stage expansion at La Guitarra. Phase 1 is expected to increase mill capacity from 500 tonnes per day to between 750 and 800 tonnes per day and includes construction of a new paste fill and thickener plant, installation of a fourth ball mill and second cone crusher, increased conveyor capacity, completion of ball mill installation, and continued tailings thickener tank construction. Phase 2 targets throughput of 1,200 to 1,500 tonnes per day by the third quarter of 2027 through a second crushing circuit, replacement of a smaller-capacity ball mill, and construction of a permitted 5.8 million tonne dry stack tailings storage facility. The presentation states that no additional permits are required for the expansion plans.

Ownership & Share Information¹

Sierra Madre Gold and Silver Ltd. has a market cap of CA$348 million, with 252.1 million shares outstanding. The company's 52-week range is CA$0.696-CA$3.25.

Institutions own 41.44% of shares, while Strategic Investors (First Majestic) own 24.74%. Management & Founders own 19.21%, and the remaining shares are held by Retail.

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