Discovery Silver: Kidd Acquisition and Record Results Forge a New Growth Path
Record gold production and the Kidd acquisition add processing optionality to a rapidly deepening exploration story.
DSV.TO · Earnings Call · 2026-08-13
Record Production and Financial Momentum
Discovery Silver delivered a standout second quarter, with record gold production of 67,300 ounces, up 12% quarter-over-quarter, and robust revenue of $319 million, a 12% increase from Q1. CFO Alison White highlighted the momentum: “We had robust revenues during Q2 of $319 million, an increase of 12% quarter-over-quarter, primarily reflecting higher ounces sold and the impact of the Kidd operations.” — Alison White, Chief Financial Officer · 2026-08-13 Adjusted earnings reached $92.3 million, nearly 3x the prior-year quarter, and EBITDA held at $170 million, supported by the Kidd contribution offsetting a slight dip in realized gold prices. The company's cost position also improved, with cash costs falling to $1,387 per ounce and milling costs down 14% to $21.50 per tonne. While free cash flow turned negative at $11 million, management attributed this to timing—accelerated payables ahead of an ERP implementation and the one-month lag in Kidd sales receipts—and reiterated that the balance sheet remains strong with over $600 million in liquidity, later upsized to $750 million via an expanded credit facility. This financial headroom supports an aggressive reinvestment program: $195–$235 million in growth capital, including capitalized exploration, and $120–$165 million in sustaining capital.The Kidd Acquisition: A Processing Enabler
Tony Makuch opened the call by emphasizing the strategic importance of the recently closed Kidd acquisition: “we completed the acquisition of <keyword id="eb06851dd1">Kidd operations</keyword>” — Anthony Makuch, President and Chief Executive Officer · 2026-08-13—a move that extends beyond simply adding production. In its first month, Kidd contributed $30 million in revenue against $19 million in costs, a solid start. More importantly, the Kidd Metallurgical Site provides critical processing capacity. Management outlined a plan to use the B circuit for Kidd Creek base metals, dedicate the C circuit to Borden ore starting in 2027, and investigate the D circuit for the TVZ target. This flexibility could unlock up to 40,000 ounces annually by feeding higher-grade ore through the Dome mill while enabling a larger Pamour open-pit operation. Harold Bird, VP of Kidd operations, noted: “Kidd operations had good performance in the first month since its acquisition, contributing a positive revenue of $30 million versus production cost of $19 million.” — Harold Bird, Vice President, Operations, Kidd Mine · 2026-08-13 The site's tailings and mill modifications are already underway, positioning Kidd as the linchpin of Discovery's growth strategy.Exploration: A Deepening Story
Exploration results during the quarter were described as “outstanding” and highlight potential well beyond the current resource base. Eric Kallio, SVP of Exploration, detailed consistent high-grade intercepts at Pamour, Dome, Borden, and the emerging Owl Creek target, where drilling continues to expand mineralization adjacent to Hoyle Pond. At Pamour, the mineralized system now extends over 4 kilometers of strike length, remaining open in all directions. New drilling at Dome is targeting a historic resource of 11 million ounces, with shallow, high-grade intercepts. These results support an updated resource expected later this year. The company is also advancing a maiden resource for the TBZ zone, with metallurgical testing underway. The sheer scale of the exploration program—three separate press releases in three weeks—led Tony to call it “an exploration story on steroids.” This is a company that is not just growing production but systematically expanding its resource base, with current resource definitions likely to be revised substantially upward.Outlook and Value Creation
Discovery's guidance for 2026 remains on track, with production, cost, and capital targets affirmed. The company is tracking well against its long-term vision of producing over 500,000 ounces of gold annually within 3–5 years, excluding Cordero. The Kidd acquisition, exploration success, and continued investment in processing capacity are all aligning to turn that vision into reality. As Tony concluded:With a strong balance sheet, record production, and a pipeline of growth projects spanning open pit operations and underground extensions, Discovery Silver is executing on a comprehensive plan. The market will be watching for the resource updates and permitting progress on Cordero, but the immediate story is one of operational momentum and strategic positioning.we can see how we're demonstrating what was going on here that we're taking the vision from concept to reality in terms of what we can build in [indiscernible] and build in the Discovery as a whole.