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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): November 11, 2024

 

GATOS SILVER, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware

(State or other jurisdiction of

incorporation) 

001-39649

(Commission File Number) 

27-2654848

(I.R.S. Employer

Identification No.)

 

925 W Georgia Street, Suite 910

Vancouver, British Columbia, Canada

(Address of principal executive offices)

V6C 3L2

(Zip Code)

 

 

Registrant’s telephone number, including area code: (604) 424-0984

 

N/A

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.001 per share GATO

New York Stock Exchange

Toronto Stock Exchange 

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

 

 

 

 

Item 2.02. Results of Operations and Financial Condition.

 

On November 11, 2024, Gatos Silver, Inc. (the “Company”) issued a press release announcing its financial results for the quarter and nine months ended September 30, 2024 and providing certain other updates. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and incorporated by reference herein.

 

The information included in Item 2.02 of this Current Report on Form 8-K and Exhibit 99.1 attached hereto are intended to be furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this report, regardless of any general incorporation language in the filing.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit No.

   

Description

99.1   Press Release, dated November 11, 2024
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  GATOS SILVER, INC.
   
   
Date: November 12, 2024 By:

/s/ Dale Andres

    Dale Andres
    Chief Executive Officer

 

 

Exhibit 99.1

 

 

925 W Georgia St, Suite 910

Vancouver, British Columbia V6C 3L2

(604) 424-0984

www.gatossilver.com

 

 

GATOS SILVER REPORTS THIRD QUARTER 2024 RESULTS INCLUDING A 200% INCREASE IN EARNINGS PER SHARE

 

Vancouver, BC — November 11, 2024 — Gatos Silver, Inc. (NYSE/TSX: GATO) (“Gatos Silver” or the “Company”) today announced its third quarter of 2024 financial and operating results including earnings per share of $0.14, up 200% from $0.05 in the third quarter of 2023. The Company will host an investor and analyst call on November 12, 2024, details of which are provided below.

 

The Company has a 70% interest in the Los Gatos Joint Venture (“LGJV”), which in turn owns the Cerro Los Gatos (“CLG”) mine in Mexico. The Company’s reporting currency is US dollars.

 

On September 5, 2024, Gatos Silver and First Majestic Silver Corp. (“First Majestic”) announced that they entered into a definitive merger agreement pursuant to which First Majestic will acquire all of the issued and outstanding common shares of Gatos Silver (the “Merger”). The proposed Merger is expected to close in the first quarter of 2025 and would consolidate three world-class, producing silver mining districts in Mexico to create a leading intermediate primary silver producer.

 

On September 25, 2024, Gatos Silver reported an updated life of mine plan (“LOM plan”) that adds two years of additional reserves and a 36% increase in silver equivalent production compared with the prior LOM plan at CLG.

 

Production for the third quarter of 2024 and improved guidance for the full year were disclosed on October 9, 2024.

 

“CLG’s strong third quarter 2024 production and cost performance together with higher metal prices resulted in record quarterly free cash flow at the LGJV and a record quarter-end cash balance for Gatos Silver,” said Dale Andres, CEO of Gatos Silver. “We believe we are well positioned to deliver significant value into the combination with First Majestic given the Company’s strong cash position and free cash flow generation together with CLG’s track record of performance, the extended mine plan disclosed in September and ongoing exploration efforts across the broader Los Gatos district.”

 

Summary

 

LGJV Q3 2024 results compared to Q3 2023 (100% basis):

 

•Revenue of $93.8 million, up 40% from $67.0 million

•Cost of sales of $31.2 million, down 1% from $31.4 million

•Record net income of $25.7 million, up 71% from $15.1 million

•Record EBITDA1 of $57.2 million, up 87% from $30.6 million

•Record cash flow from operations of $58.2 million, up 98% from $29.4 million

•Record free cash flow1 of $42.6 million, up 199% from $14.3 million

•Silver production of 2.42 million ounces, up 9% from 2.22 million ounces

•Silver equivalent production2 of 3.84 million ounces, up 11% from 3.46 million ounces

•Co-product AISC1 of $16.13 per ounce of payable silver equivalent, down 9% from $17.64

•By-product AISC1 of $9.61 per ounce of payable silver, down 35% from $14.71

 

Gatos Silver Q3 2024 results compared to Q3 2023:

 

•Net income of $9.9 million, up from $3.3 million, and adjusted net income1 of $15.2 million

•Basic and diluted earnings per share of $0.14, up from $0.05 per share, and adjusted basic and diluted earnings per share1 of $0.22 and $0.21, respectively

•EBITDA1 of $9.1 million, compared to $3.2 million, and adjusted EBITDA1 of $14.4 million

•Cash flow provided by operating activities and free cash flow1 of $34.2 million, compared to $33.3 million

 

 

1 See “Non-GAAP Financial Measures” below.

2 See definition of silver equivalent production below.

 

1 

 

At the LGJV, the 40% increase in revenue in Q3 2024, compared to the same quarter in 2023, was primarily attributable to higher sales volumes and higher realized metal prices. Cost of sales decreased by 1% despite the higher sales volumes. Site operating unit costs of $96.93/t milled were 8% lower than in Q3 2023 primarily due to higher mill throughput in the quarter. By-product AISC1 per ounce of payable silver decreased to $9.61 primarily due to significantly higher silver and by-product production and sales volumes.

 

For Gatos Silver, higher unadjusted and adjusted net income, earnings per share and EBITDA1 for Q3 2024 were primarily attributable to the higher equity income from the LGJV and higher interest income. General and administrative expenses were higher in Q3 2024, mainly due to $5.3 million of costs related to the proposed Merger with First Majestic (which are excluded from adjusted net income1, adjusted earnings per share and adjusted EBITDA1 as described below), partially offset by a decrease of $1.1 million in non-cash stock-based compensation expense, a $0.9 million decrease in legal and consulting fees not associated with the proposed Merger, and a $0.4 million decrease in insurance expense.

 

As of September 30, 2024, the Company and the LGJV reported cash and cash equivalents of $116.7 million and $33.9 million, respectively. The Company’s quarter-end cash balance was a new record, up 40% from $82.5 million at the end of June 30, 2024. The increase in cash was due to $37.9 million of cash distributions received during the third quarter. As of October 31, 2024, the Company and the LGJV had cash and cash equivalents of $114.8 million and $47.3 million, respectively. On November 7, 2024, the LGJV made a capital distribution to its partners of $40.0 million, of which the Company received $28.0 million. The Company continues to be debt free with $50.0 million available under the Revolving Credit Facility.

 

Financial and Operating Results

 

Below is select operational and financial information for the three and nine months ended September 30, 2024 and 2023. For a detailed discussion of the three and nine months ended September 30, 2024 financial and operating results refer to the Form 10-Q expected to be filed on November 12, 2024 on both the EDGAR and SEDAR+ systems and posted on the Company’s website at https://gatossilver.com.

 

2 

 

Los Gatos Joint Venture

 

LGJV 100% Basis

Selected Financial Information (Unaudited) 

 

Three Months Ended 

September 30, 

 

Nine Months Ended 

September 30, 

(in millions, except where otherwise stated)  2024  2023  2024  2023
Revenue  $93.8   $67.0   $260.3   $195.2 
   Cost of sales   31.2    31.4    93.9    83.3 
   Royalties and duties   0.6    0.3    1.7    1.0 
   Exploration   1.6    1.0    4.6    2.1 
   General and administrative   3.9    4.4    12.3    12.7 
   Depreciation, depletion and amortization   17.8    16.7    58.9    59.6 
Other (income) expense   (1.0)   (0.9)   1.3    (1.8)
Income tax expense (recovery)   13.9    (0.9)   31.2    9.8 
Net income and comprehensive income2  $25.7   $15.1   $56.4   $28.5 
                     
Sustaining capital1  $12.9   $9.1   $33.2   $29.9 
Resource development drilling expenditures1  $2.1   $3.5   $7.2   $10.5 
EBITDA1  $57.2   $30.6   $146.4   $97.2 
Cash provided by operating activities  $58.2   $29.4   $150.0   $103.8 
Free cash flow1  $42.6   $14.3   $108.8   $62.6 
                     
Operating Results (CLG 100% Basis)                    
Tonnes milled (dmt)   298,586    268,312    885,570    794,082 
Tonnes milled per day (dmt)   3,246    2,916    3,232    2,909 
Average Grades                    
     Silver grade (g/t)   285    285    281    293 
     Zinc grade (%)   4.04    3.82    4.19    3.92 
     Lead grade (%)   1.97    1.84    1.93    1.85 
     Gold grade (g/t)   0.30    0.30    0.29    0.29 
Production - Contained Metal                    
     Silver ounces (millions)   2.42    2.22    7.10    6.65 
     Zinc pounds – in zinc conc. (millions)   16.5    13.8    51.5    42.7 
     Lead pounds – in lead conc. (millions)   11.4    9.5    33.5    28.7 
     Gold ounces – in lead conc. (thousands)   1.45    1.28    4.20    3.86 
     Silver equivalent ounces (millions)3   3.84    3.46    11.42    10.45 
Co-product cash cost per ounce of payable silver equivalent1  $12.13   $14.42   $11.86   $12.43 
By-product cash cost per ounce of payable silver1  $3.69   $10.04   $3.67   $6.42 
Co-product AISC per ounce of payable silver equivalent1  $16.13   $17.64   $15.21   $15.81 
By-product AISC per ounce of payable silver1  $9.61   $14.71   $8.82   $11.40 
                     
Sales volume by payable metal                    
     Silver ounces (millions)   2.18    1.96    6.45    5.99 
     Zinc pounds – in zinc conc. (millions)   14.7    12.4    44.3    36.2 
     Lead pounds – in lead conc. (millions)   10.6    8.7    31.6    26.6 
     Gold ounces – in lead conc. (thousands)   1.13    0.96    3.28    3.02 
     Copper pounds – in lead conc. (millions)   0.03    —    0.13    — 
                     
Average realized price by payable metal                    
     Average realized price per silver ounce4  $29.62   $24.24   $27.09   $25.08 
     Average realized price per zinc pound4  $1.26   $0.89   $1.30   $1.10 
     Average realized price per lead pound4  $0.93   $0.97   $0.92   $0.98 
     Average realized price per gold ounce4  $2,362   $1,885   $2,162   $1,828 
     Average realized price per copper pound4  $3.28   $—   $3.72   $— 

 

1 See Non-GAAP Financial Measures below.

2 Totals may not add up due to rounding.

3 Silver equivalent production for 2024 is calculated using prices of $23/oz silver, $1.20/lb zinc, $0.90/lb lead and $1,800/oz gold to “convert” zinc, lead and gold production contained in concentrate to “equivalent” silver ounces (contained metal, multiplied by price, divided by silver price). For 2023, silver equivalent production was calculated using prices of $22/oz silver, $1.20/lb zinc, $0.90/lb lead and $1,700/oz gold. For comparative purposes, the calculated silver equivalent production for the three and nine months ended September, 2023 would be 3.41 million ounces and 10.30 million ounces, respectively, using price assumptions for 2024.

4 Realized prices include the impact of final settlement adjustments from prior period sales.

 

3 

 

Gatos Silver, Inc.

 

Selected Financial Information (Unaudited) 

Three Months Ended 

September 30, 

 

Nine Months Ended 

September 30, 

(in millions, except where otherwise stated)  2024  2023  2024  2023
Exploration  $0.1   $—   $0.2   $— 
General and Administrative   10.4    7.5    25.3    19.2 
Total expenses2   10.6    7.5    25.5    19.3 
Equity income in affiliates   18.2    9.4    40.0    15.9 
Other income, net   2.8    1.3    7.8    3.9 
Total net other income2   21.0    10.8    47.8    19.8 
Income tax expense   0.5    —    0.7    — 
Net income and comprehensive income2  $9.9   $3.3   $21.6   $0.5 
Net income per share basic  $0.14   $0.05   $0.31   $0.01 
Net income per share diluted  $0.14   $0.05   $0.30   $0.01 
                     
Adjusted net income1  $15.2   $3.3   $28.3   $0.5 
Adjusted net income per share (basic)1  $0.22   $0.05   $0.41   $0.01 
Adjusted net income per share (diluted)1  $0.21   $0.05   $0.40   $0.01 
                     
EBITDA1  $9.1   $3.2   $19.1   $0.6 
Adjusted EBITDA1  $14.4   $3.2   $25.8   $0.6 
Net cash provided by operating activities  $34.2   $33.3   $61.2   $25.5 
Free cash flow1  $34.2   $33.3   $61.2   $25.5 

 

1 See Non-GAAP Financial Measures below.

2 Totals may not add up due to rounding.

 

Financial Results Webcast and Conference Call

 

Investors and analysts are invited to attend the financial results webcast and conference call as follows:

 

Date: Tuesday, November 12, 2024

Time: 11:00 a.m. ET

Listen-Only Webcast: https://events.q4inc.com/attendee/627122313

Direct Event Registration Link (for Analysts only): https://registrations.events/direct/Q4I98433625

An archive of the webcast will be available on the Company’s website at: https://gatossilver.com within 24 hours.

 

About Gatos Silver

 

Gatos Silver is a silver dominant exploration, development and production company that discovered a new silver and zinc-rich mineral district in southern Chihuahua State, Mexico. As a 70% owner of the Los Gatos Joint Venture (“LGJV”), the Company is primarily focused on operating the Cerro Los Gatos mine and on growth and development of the Los Gatos district. The LGJV includes approximately 103,000 hectares of mineral rights, representing a highly prospective and under-explored district with numerous silver-zinc-lead epithermal mineralized zones identified as priority targets.

 

On September 5, 2024, Gatos Silver and First Majestic Silver Corp. (“First Majestic”) announced that they entered into a definitive merger agreement pursuant to which First Majestic will acquire all of the issued and outstanding common shares of Gatos Silver (the “Merger”). The proposed Merger would consolidate three world-class, producing silver mining districts in Mexico to create a leading intermediate primary silver producer. Information relating to the proposed Merger can be found at the Company’s website at www.gatossilver.com.

 

4 

 

Qualified Person

 

Scientific and technical disclosure in this press release was approved by Anthony (Tony) Scott, P.Geo., Senior Vice President of Corporate Development and Technical Services of Gatos Silver who is a “Qualified Person” as defined in S-K 1300 and NI 43-101.

 

Non-GAAP Financial Measures

 

We use certain measures that are not defined by GAAP to evaluate various aspects of our business. These non-GAAP financial measures are intended to provide additional information only and do not have any standardized meaning prescribed by GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The measures are not necessarily indicative of operating profit or cash flow from operations as determined under GAAP.

 

Cash Costs and All-In Sustaining Costs

 

Cash costs and all-in sustaining costs (“AISC”) are non-GAAP measures. AISC was calculated based on guidance provided by the World Gold Council (“WGC”). WGC is not a regulatory industry organization and does not have the authority to develop accounting standards for disclosure requirements. Other mining companies may calculate AISC differently as a result of differences in underlying accounting principles and policies applied, as well as definitional differences of sustaining versus expansionary (i.e. non-sustaining) capital expenditures based upon each company’s internal policies. Current GAAP measures used in the mining industry, such as cost of sales, do not capture all of the expenditures incurred to discover, develop and sustain production. Therefore, we believe that cash costs and AISC are non-GAAP measures that provide additional information to management, investors and analysts that aid in the understanding of the economics of the Company’s operations and performance compared to other producers and provides investors visibility by better defining the total costs associated with production.

 

Cash costs include all direct and indirect operating cash costs related directly to the physical activities of producing metals, including mining, processing and other plant costs, treatment and refining costs, general and administrative costs, royalties and mining production taxes. AISC includes total production cash costs incurred at the LGJV’s mining operations plus sustaining capital expenditures. The Company believes this measure represents the total sustainable costs of producing silver from current operations and provides additional information of the LGJV’s operational performance and ability to generate cash flows. As the measure seeks to reflect the full cost of silver production from current operations, new project and expansionary capital at current operations are not included. Certain cash expenditures such as exploration, new project spending, tax payments, dividends, and financing costs are not included.

 

Adjusted Net Income

 

Management uses adjusted net income, which exclude costs associated with the strategic review resulting in the proposed Merger with First Majestic, to evaluate the Company’s operating performance. The Company believes the use of adjusted net income reflects the underlying performance of our business and allows investors and analysts to compare the results of the Company to our historical results and to similar results of other mining companies. Management’s determination of the components of adjusted net income are evaluated periodically and is based, in part, on a review of non-GAAP financial measures used by mining industry analysts.

 

EBITDA

 

Management uses EBITDA to evaluate the Company’s operating performance, to plan and forecast its operations, and assess leverage levels and liquidity measures. EBITDA is defined as net income adjusted for interest expense, interest income, income tax expense and depreciation, depletion and amortization expense. The Company believes the use of EBITDA reflects the underlying operating performance of our core business and allows investors and analysts to compare results of the Company to similar results of other mining companies. EBITDA does not represent, and should not be considered an alternative to, net income or cash flow from operations as determined under GAAP. Other companies may calculate EBITDA differently and those calculations may not be comparable to our presentation.

 

5 

 

Adjusted EBITDA

 

Management uses adjusted EBITDA to evaluate the Company’s ongoing operating performance, without the impact of costs associated with the strategic review resulting in the proposed Merger with First Majestic. The Company believes the use of adjusted EBITDA reflects the underlying operating performance of our core business and allows investors and analysts to compare the results of the Company to our historical results and to similar results of other mining companies. Adjusted EBITDA does not represent, and should not be considered an alternative to, net income or cash flow from operations as determined under GAAP. Other companies may calculate adjusted EBITDA differently and those calculations may not be comparable to our presentation.

 

Free Cash Flow

 

Management uses free cash flow as a non-GAAP measure to analyze cash flows generated from operations. Free cash flow is cash provided by (used in) operating activities less cash flow from investing activities as presented on the consolidated statements of cash flows. The Company believes free cash flow is also useful as one of the bases for comparing the Company’s performance with its competitors. Although free cash flow and similar measures are frequently used as measures of cash flows generated from operations by other companies, the Company’s calculation of free cash flow is not necessarily comparable to such other similarly titled captions of other companies.

 

Reconciliation of GAAP to non-GAAP measures

 

The table below presents a reconciliation between the most comparable GAAP measure of the LGJV’s expenses to the non-GAAP measures of (i) cash costs, (ii) cash costs, net of by-product credits, (iii) co-product AISC and (iv) by-product AISC for our operations.

 

CLG 100% Basis 

Financial 

 

Three Months Ended 

September 30, 

 

Nine Months Ended 

September 30, 

(in thousands, except where otherwise stated)  2024  2023  2024  2023
Expenses  $55,215   $53,809   $171,408   $158,648 
Depreciation, depletion and amortization   (17,824)   (16,712)   (58,901)   (59,558)
Exploration1   (1,605)   (998)   (4,577)   (2,118)
Treatment and refining costs2   3,420    4,793    9,716    12,865 
Cash costs  $39,206   $40,892   $117,646   $109,837 
Sustaining capital3   12,919    9,128    33,220    29,870 
Co-product all-in sustaining costs  $52,125   $50,020   $150,866   $139,707 
By-product credits4   (31,168)   (21,246)   (93,986)   (71,407)
All-in sustaining costs, net of by-product credits  $20,957   $28,774   $56,880   $68,300 
Cash costs, net of by-product credits  $8,038   $19,646   $23,660   $38,430 
                     
Payable ounces of silver equivalent5   3,232    2,835    9,917    8,837 
Co-product cash cost per ounce of payable silver equivalent  $12.13   $14.42   $11.86   $12.43 
Co-product AISC per ounce of payable silver equivalent  $16.13   $17.64   $15.21   $15.81 
                     
Payable ounces of silver   2,180    1,956    6,448    5,989 
By-product cash cost per ounce of payable silver  $3.69   $10.04   $3.67   $6.42 
By-product AISC per ounce of payable silver  $9.61   $14.71   $8.82   $11.40 

 

1 Exploration costs are not related to current operations.

2 Represent reductions on customer invoices and included in sales of the LGJV combined statement of operations and income.

3 Sustaining capital excludes resource development drilling costs related to resource development drilling of the CLG deposit.

4 By-product credits reflect realized metal prices of zinc, lead and gold for the applicable period, which includes any final settlement adjustments from prior periods.

 

6 

 

5 Silver equivalents utilize the average realized prices during the nine months ended September 30, 2024, of $27.09/oz silver, $1.30/lb zinc, $0.92/lb lead, $2,162/oz gold and $3.72/lb copper and the average realized prices during the three months ended September 30, 2024, of $29.62/oz silver, $1.26/lb zinc, $0.93/lb lead and $2,362/oz gold and $3.28/lb copper. Silver equivalents utilize the average realized prices during the nine months ended September 30, 2023, of $25.08/oz silver, $1.10/lb zinc, $0.98/lb lead and $1,828/oz gold and the average realized prices during the three months ended September 30, 2023, of $24.24/oz silver, $0.89/lb zinc, $0.97/lb lead and $1,885/oz gold. The average realized prices are determined based on revenue inclusive of final settlements.

 

The following table provides a breakdown of cash flows used by investing activities of the LGJV and a reconciliation of sustaining capital and resource development drilling to that measure:

 

  

Three Months Ended 

September 30, 

 

Nine Months Ended 

September 30, 

(in thousands)  2024  2023  2024  2023
Cash flow used by investing activities  $15,591   $15,168   $41,148   $41,160 
Sustaining capital   12,919    9,128    33,220    29,870 
Resource development drilling   2,092    3,452    7,199    10,499 
Materials & supplies   —    1,826    —    503 
Change in capital-related accounts payable   580    762    729    288 
Total  $15,591   $15,168   $41,148   $41,160 

 

The table below reconciles adjusted net income and adjusted net income per share (basic and diluted), which are non-GAAP measures to net income and net income per share (basic and diluted), respectively, for the Company:

 

  

Three Months Ended 

September 30, 

 

Nine Months Ended 

September 30, 

(in thousands)  2024  2023  2024  2023
Net income  $9,884   $3,288   $21,572   $530 
Costs related to the proposed Merger with First Majestic   5,314    —    6,747    — 
Adjusted net income  $15,198   $3,288   $28,319   $530 
Weighted average shares:                    
  Basic   69,343,979    69,162,223    69,247,280    69,162,223 
  Diluted   71,613,178    69,524,838    71,110,386    69,381,222 
Net income per share (basic)  $0.14   $0.05   $0.31   $0.01 
Costs related to the proposed Merger with First Majestic per share (basic)  $0.08   $—   $0.10   $— 
Adjusted net income per share (basic)  $0.22   $0.05   $0.41   $0.01 
Costs related to the proposed Merger with First Majestic per share (diluted)  $0.07   $—   $0.09   $— 
Adjusted net income per share (diluted)  $0.21   $0.05   $0.40   $0.01 

7 

 

The table below reconciles EBITDA and adjusted EBITDA, which are non-GAAP measures, to net income for the Company:

 

  

Three Months Ended 

September 30, 

 

Nine Months Ended 

September 30, 

(in thousands)  2024  2023  2024  2023
Net income  $9,884   $3,288   $21,572   $530 
Interest expense   —    332    —    679 
Interest income   (1,322)   (389)   (3,206)   (676)
Income tax expense   529    —    701    — 
Depreciation, depletion and amortization   4    3    11    74 
EBITDA  $9,095   $3,234   $19,078   $607 
Costs related to the strategic review resulting in the Merger Agreement with First Majestic  $5,314    —   $6,747    — 
Adjusted EBITDA  $14,409   $3,234   $25,825   $607 

 

The table below reconciles EBITDA, a non-GAAP measure, to the LGJV’s net income:

 

  

Three Months Ended 

September 30, 

 

Nine Months Ended 

September 30, 

(in thousands)  2024  2023  2024  2023
Net income  $25,720   $15,053   $56,379   $28,500 
Interest expense   102    343    851    484 
Interest income   (349)   (592)   (892)   (1,147)
Income tax expense (recovery)   13,867    (884)   31,186    9,814 
Depreciation, depletion and amortization   17,824    16,712    58,901    59,558 
EBITDA  $57,164   $30,632   $146,425   $97,209 

 

The following table sets forth a reconciliation of free cash flow, a non-GAAP financial measure, to cash provided by operating activities for the Company, which the Company believes to be the GAAP financial measure most directly comparable to free cash flow.

 

  

Three Months Ended 

September 30, 

 

Nine Months Ended 

September 30, 

(in thousands)  2024  2023  2024  2023
Net cash provided by operating activities  $34,236   $33,330   $61,171   $25,465 
Net cash used by investing activities   —    —    —    — 
Free cash flow  $34,236   $33,330   $61,171   $25,465 

8 

 

The following table sets forth a reconciliation of free cash flow, a non-GAAP financial measure, to cash provided by operating activities for the LGJV.

 

  

Three Months Ended 

September 30, 

 

Nine Months Ended 

September 30, 

(in thousands)  2024  2023  2024  2023
Net cash provided by operating activities  $58,175   $29,424   $149,983   $103,789 
Net cash used by investing activities   (15,591)   (15,168)   (41,148)   (41,160)
Free cash flow  $42,584   $14,256   $108,835   $62,629 

 

Please see Appendix A for the unaudited condensed consolidated balance sheets of the Company and the LGJV as of September 30, 2024 and December 31, 2023, the related unaudited condensed consolidated statements of income and comprehensive income of the Company, the unaudited combined statements of operations and comprehensive income of the LGJV for the three and nine months ended September 30, 2024 and 2023, and the unaudited statements of cash flows for the nine months ended September 30, 2024 and 2023.

 

Forward-Looking Statements 

This press release contains statements that constitute “forward looking information” and “forward-looking statements” within the meaning of U.S. and Canadian securities laws. All statements other than statements of historical facts contained in this press release, including statements regarding our updated LOM plan, 2024 revised guidance and the expected timing, benefits, impacts, and completion of the proposed Merger with First Majestic, are forward-looking statements. Forward-looking statements are based on management’s beliefs and assumptions and on information currently available to management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements, and such other risks and uncertainties described in our filings with the U.S. Securities and Exchange Commission and Canadian securities commissions. Gatos Silver expressly disclaims any obligation or undertaking to update the forward-looking statements contained in this press release to reflect any change in its expectations or any change in events, conditions, or circumstances on which such statements are based unless required to do so by applicable law. No assurance can be given that such future results will be achieved. Forward-looking statements speak only as of the date of this press release.

 

Investors and Media Contact

 

André van Niekerk 

Chief Financial Officer 

investors@gatossilver.com 

(604) 424 0984

 

9 

 

APPENDIX A

 

GATOS SILVER, INC. 

CONDENSED CONSOLIDATED BALANCE SHEETS 

(UNAUDITED)

 

   September 30,  December 31,
(US$ in thousands)  2024  2023
ASSETS          
Current Assets          
Cash and cash equivalents  $116,732   $55,484 
Related party receivables   292    560 
Other current assets   1,215    22,642 
Total current assets   118,239    78,686 
Non-Current Assets          
Investment in affiliates   285,454    321,914 
Deferred tax assets   222    266 
Other non-current assets   348    38 
Total Assets  $404,263   $400,904 
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current Liabilities          
Accounts payable and other accrued liabilities  $12,226   $33,357 
Non-Current Liabilities          
Lease liability   187    — 
Stockholders’ Equity          
Common Stock, $0.001 par value; 700,000,000 shares authorized; 69,352,645 and 69,181,047 shares outstanding as of September 30, 2024 and December 31, 2023, respectively   117    117 
Paid-in capital   556,050    553,319 
Accumulated deficit   (164,317)   (185,889)
Total stockholders’ equity   391,850    367,547 
Total Liabilities and Stockholders’ Equity  $404,263   $400,904 

10 

 

GATOS SILVER, INC. 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME  

(UNAUDITED)

 

   Three Months Ended September 30,  Nine months ended September 30,
(US$ in thousands, except for share data)  2024  2023  2024  2023
Expenses            
Exploration  $144   $—   $219   $26 
General and administrative   10,435    7,494    25,270    19,157 
Amortization   4    3    11    74 
Total expenses   10,583    7,497    25,500    19,257 
Other income                    
Equity income in affiliates   18,171    9,437    39,985    15,922 
Interest expense   —    (332)   —    (679)
Interest income   1,322    389    3,206    676 
Other income   1,503    1,291    4,582    3,868 
Other income   20,996    10,785    47,773    19,787 
Income before taxes   10,413    3,288    22,273    530 
Income tax expense   529    —    701    — 
Net income and comprehensive income  $9,884   $3,288   $21,572   $530 
Net income per share:                    
Basic  $0.14   $0.05   $0.31   $0.01 
Diluted  $0.14   $0.05   $0.30   $0.01 
Weighted average shares outstanding:                    
Basic   69,343,979    69,162,223    69,247,280    69,162,223 
Diluted   71,613,178    69,524,838    71,110,386    69,381,222 

11 

 

GATOS SILVER, INC. 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

(UNAUDITED)

 

   Nine months ended September 30,
(US$ in thousands)  2024  2023
OPERATING ACTIVITIES          
Net income  $21,572   $530 
           
Adjustments to reconcile net income to net cash provided (used) by operating activities:          
Amortization   11    74 
Stock-based compensation expense   4,319    3,327 
Equity income in affiliates   (39,985)   (15,922)
Distributions and dividends received from affiliate   76,445    35,000 
Other   94    837 
           
Changes in operating assets and liabilities:          
Receivables from related-parties   268    678 
Accounts payable and other accrued liabilities   (23,007)   5 
Other current assets   21,454    936 
Net cash provided by operating activities   61,171    25,465 
           
INVESTING ACTIVITIES          
Net cash used by investing activities   —    — 
           
FINANCING ACTIVITIES          
Repayment of Credit facility   —    (9,000)
Lease payments   (89)   — 
Proceeds from exercise of stock options   166    — 
Net cash provided (used) by financing activities   77    (9,000)
 Net increase in cash and cash equivalents   61,248    16,465 
Cash and cash equivalents, beginning of period   55,484    17,004 
Cash and cash equivalents, end of period  $116,732   $33,469 
           
Interest paid  $16   $417 
Interest earned  $3,206   $690 

12 

 

LOS GATOS JOINT VENTURE 

COMBINED BALANCE SHEETS 

(UNAUDITED)

 

   September 30,  December 31,
(US$ in thousands)  2024  2023
ASSETS          
Current Assets          
Cash and cash equivalents  $33,884   $34,303 
Receivables   13,646    12,634 
Inventories   16,180    16,397 
VAT receivable   13,417    12,610 
Income tax receivable   9,296    20,185 
Other current assets   3,435    1,253 
Total current assets   89,858    97,382 
Non-Current Assets          
Mine development, net   231,060    234,980 
Property, plant and equipment, net   159,220    171,965 
Deferred tax assets   699    9,568 
Total non-current assets   390,979    416,513 
Total Assets  $480,837   $513,895 
LIABILITIES AND OWNERS’ CAPITAL          
Current Liabilities          
Accounts payable and accrued liabilities  $33,999   $29,100 
VAT payable   11,873    8,684 
Income taxes payable   11,204    920 
Related party payable   270    560 
Total current liabilities   57,346    39,264 
Non-Current Liabilities          
Lease liability   155    208 
Asset retirement obligation   12,245    11,593 
Deferred tax liabilities   4,974    3,885 
Total non-current liabilities   17,374    15,686 
Owners’ Capital          
Capital contributions   360,638    455,638 
Paid-in capital   18,186    18,186 
Retained earnings (accumulated deficit)   27,293    (14,879)
Total owners’ capital   406,117    458,945 
Total Liabilities and Owners’ Capital  $480,837   $513,895 

13 

 

LOS GATOS JOINT VENTURE 

COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME  

(UNAUDITED)

 

   Three months ended September 30,  Nine months ended September 30,
(US$ in thousands)  2024  2023  2024  2023
Revenue  $93,839   $67,038   $260,255   $195,162 
Expenses                    
Cost of sales   31,204    31,446    93,931    83,255 
Royalties and duties   639    298    1,682    1,024 
Exploration   1,605    998    4,577    2,118 
General and administrative   3,943    4,355    12,317    12,693 
Depreciation, depletion and amortization   17,824    16,712    58,901    59,558 
Total expenses   55,215    53,809    171,408    158,648 
                     
Other (income) expense                    
Accretion expense   217    273    652    866 
Interest expense   102    343    851    484 
Interest income   (349)   (592)   (892)   (1,147)
Other (income) expense   (13)   (18)   635    13 
Foreign exchange (gain) loss   (920)   (946)   36    (2,016)
    (963)   (940)   1,282    (1,800)
                     
Income before taxes   39,587    14,169    87,565    38,314 
Income tax expense (recovery)   13,867    (884)   31,186    9,814 
Net income and comprehensive income  $25,720   $15,053   $56,379   $28,500 

14 

 

LOS GATOS JOINT VENTURE 

COMBINED STATEMENTS OF CASH FLOWS 

(UNAUDITED)

 

   Nine months ended September 30,
(US$ in thousands)  2024  2023
Cash flows from operating activities:          
Net income  $56,379   $28,500 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation, depletion and amortization   58,901    59,558 
Accretion   652    866 
Deferred taxes   10,210    4,743 
Unrealized loss (gain) on foreign currency rate change   105    (5,007)
Other   —    (6)
           
Changes in operating assets and liabilities:          
VAT receivable   (1,326)   11,215 
Receivables   (1,012)   16,725 
Inventories   (1,379)   (1,429)
Other current assets   (2,190)   403 
Income tax receivable   8,495    (633)
Accounts payable and other accrued liabilities   21,438    (8,596)
Payables to related parties   (290)   (730)
Asset Retirement Obligation   —    (1,820)
Net cash provided by operating activities   149,983    103,789 
           
Cash flows from investing activities:          
Mine development   (32,263)   (27,151)
Purchase of property, plant and equipment   (8,885)   (13,506)
Materials and supplies inventory   —    (503)
Net cash used by investing activities   (41,148)   (41,160)
           
Cash flows from financing activities:          
Equipment loan and lease payments   (47)   (532)
Capital distributions   (95,000)   (50,000)
Dividends paid to partners   (14,207)   — 
Net cash used by financing activities   (109,254)   (50,532)
           
Net (decrease) Increase in cash and cash equivalents   (419)   12,097 
Cash and cash equivalents, beginning of period   34,303    34,936 
Cash and cash equivalents, end of period  $33,884   $47,033 
Interest paid  $851   $484 
Interest earned  $892   $1,147 

15 

 

v3.24.3
Cover
Nov. 11, 2024
Cover [Abstract]  
Document Type 8-K
Amendment Flag false
Document Period End Date Nov. 11, 2024
Entity File Number 001-39649
Entity Registrant Name GATOS SILVER, INC.
Entity Central Index Key 0001517006
Entity Tax Identification Number 27-2654848
Entity Incorporation, State or Country Code DE
Entity Address, Address Line One 925 W Georgia Street
Entity Address, Address Line Two Suite 910
Entity Address, City or Town Vancouver
Entity Address, State or Province BC
Entity Address, Country CA
Entity Address, Postal Zip Code V6C 3L2
City Area Code 604
Local Phone Number 424-0984
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common Stock, par value $0.001 per share
Trading Symbol GATO
Security Exchange Name NYSE
Entity Emerging Growth Company true
Elected Not To Use the Extended Transition Period true
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