Torex Gold’s Media Luna Milestone Positions Company for Strong Free Cash Flow Growth

Torex Gold Resources Inc. (TRGL) marked a pivotal moment in its growth trajectory with the April 2025 declaration of commercial production at its Media Luna gold-silver project in Mexico. The completion of this $1.5 billion expansion, which adds a second processing circuit to its Morelos Complex, is now set to deliver a critical inflection point for the company’s financial performance.

Production and Project Success

Media Luna’s first concentrate shipments in April 2025 brought Torex’s total payable gold equivalent production to 59,630 oz AuEq in Q1, slightly below the full-year guidance of 400,000–450,000 oz AuEq, but in line with expectations given a planned four-week shutdown for plant integration. The company emphasized that production will ramp up significantly in Q2, with the project now fully operational. Gold sold reached 60,568 oz AuEq, supported by a record average realized price of $2,793/oz, driving revenue to $170 million.

Financial Performance: The Path to Positive Cash Flow

While Torex’s Q1 financials showed a temporary drag on free cash flow, the underlying trends are promising. All-in sustaining costs (AISC) came in at $1,405/oz AuEq, within the guided range, while EBITDA hit $88.1 million, a strong result given the shutdown period. The key challenge was operating cash flow of -$9.9 million, driven by $101.6 million in tax and royalty payments—primarily tied to 2024 obligations.

The most critical figure, however, is free cash flow, which was negative $133.3 million due to $123.5 million in capital expenditures and deferred Media Luna sales. Torex drew $130 million from its credit facility as planned, but management stressed this was a temporary measure. With Media Luna’s full production now underway and gold prices remaining robust, the company expects to repay the debt quickly.

Safety and Operational Challenges

The quarter was not without hurdles. A fatal carbon monoxide exposure incident in December 2024 at the EPO underground mine led to a thorough investigation. While the LTIF rate improved to 0.59, the incident underscores the risks inherent in underground mining. Torex’s launch of a “Next Level Safety” program—including new training protocols and equipment upgrades—aims to rebuild confidence in its safety culture.

Exploration and Reserve Growth: Building Long-Term Value

Torex is also positioning itself for sustained production through aggressive exploration. At Media Luna West, drilling defined a 600m by 400m mineralized footprint, while East zone drilling returned copper grades exceeding 2%, signaling potential for polymetallic value. The 2025 plan to drill 125,000 meters—double 2024’s efforts—targets expanding resources to support 450,000 oz AuEq annual production through 2030 and extending reserve life to 2035.

Reserve updates highlight progress:
- Media Luna’s EPO Deposit: 781 koz AuEq Probable Reserve, with Inferred Resources rising 32% to 954 koz AuEq.
- ELG Underground: Reserves increased 1% to 662 koz AuEq, extending mine life.

Outlook: Turning the Corner

Torex’s strategic priorities are clear:
1. Debt Reduction: Repay the $130 million credit facility draw using cash flows from Media Luna’s ramp-up.
2. Cash Flow Generation: Achieve positive free cash flow by mid-2025, supported by higher production and a $2,700/oz+ gold price environment.
3. Shareholder Returns: Introduce a formal return of capital policy once liquidity strengthens.

Conclusion

Torex Gold’s Q1 results confirm that the Media Luna project is a transformative success, despite near-term cash flow headwinds. With 450,000 oz AuEq annual production within reach and a $1,400–$1,600/oz AISC target, the company is well-positioned to capitalize on strong gold prices. The $197.6 million liquidity position and planned debt repayment timeline alleviate near-term risks, while exploration efforts aim to lock in long-term growth.

Investors should focus on Torex’s ability to execute its 2025 guidance—its 7th consecutive year of delivery—and the 2,000 tpd mining rate target at Media Luna by mid-2026. At current gold prices and with a 12-month LTIF rate of 0.59, Torex appears poised to transition from a project developer to a consistent free cash flow generator, making it a compelling play in the gold sector.