Gatos Silver, Inc. (NYSE/TSX: GATO) (“Gatos Silver” or the
“Company”) today announced that it has completed disclosure of
outstanding 2021 and 2022 securities regulatory filings and has
reached an agreement in principle to settle the US class action
lawsuit.
The Company also today announced that it has set the date of its
2023 annual meeting of stockholders (the “Annual Meeting”) as
September 6, 2023. The record date for the Annual Meeting is July
14, 2023. The time, format and other details for the Annual Meeting
will be set forth in the Company’s proxy materials for the Annual
Meeting, which will be filed on both EDGAR and SEDAR systems.
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.
Dale Andres, CEO of Gatos Silver, said: “We are pleased with how
the CLG operation is performing to start the year, and we continue
to maintain our current annual production and cost guidance for
2023. We are working to finalize our quarterly report for Q1 2023
which we expect to file shortly. We are also looking forward to
providing an updated mineral resource and reserve estimate in the
third quarter of this year, including a new life of mine plan as we
continue our strategic focus on mine life extension, accelerating
the drilling on the mineralization discovered at depth in the new
South-East Deeps zone and exploration in the highly prospective Los
Gatos district.”
Completed Filings
The Company has filed its Annual Report on Form 10-K for the
fiscal year ended December 31, 2022, its amended Annual Report on
Form 10-K/A for the fiscal year ended December 31, 2021 and its
amended Quarterly Reports on Form 10-Q/A for the periods ended
March 31, 2022, June 30, 2022 and September 30, 2022 on the EDGAR
system. All of these filings are also posted on the Company’s
website at https://gatossilver.com.
Consistent with the Company’s prior disclosures, the adjustments
to the restated financial statements for 2021 and the first three
quarters of 2022 were non-cash items, consisting primarily of
changes to the timing and recognition of current and deferred tax
assets and liabilities at the LGJV and the timing and recognition
of the priority distribution obligation on the previously
recognized income from affiliates for the Company. During the
process of correcting the deferred tax assets and liabilities, the
Company also identified an overstatement in the fair value
financial model used to calculate the impairment of the investment
in affiliates.
As a result of these adjustments, 2021 restated results include
a non-cash impairment of $80.3 million (previously $51.6 million)
in Gatos Silver’s investment in affiliates. The 2022 results
include a loss allowance of $7.9 million for the US class action
lawsuit. Additional information regarding the financial results can
be found in the Company’s filings on EDGAR and SEDAR, which are
also available on the Company’s website.
LGJV 2022 results compared to 2021 (100%
basis):
- Revenue of $311.7 million, up 25% from $249.2 million
- Cost of sales of $107.1 million, up 10% from $97.7 million
- Net income of $72.2 million, down 8% from $78.6 million
- Cash flow from operations of $157.4 million, up 31% from $119.8
million
- By-product cash cost of $2.17 per ounce of payable silver, down
56% from $4.98 (1)
- By-product all-in sustaining costs (“AISC”) of $10.24 per ounce
of payable silver, down 35% from $15.72 (1)
(1) These measures are non-GAAP measures. See “Non-GAAP
Financial Performance Measures” below for additional
information.
For the full year 2022, Gatos Silver’s net income was $14.5
million or $0.21 per share compared with a net loss of $65.9
million or $(1.03) per share in 2021. The improvement in net income
for the year 2022 versus 2021 was primarily due to the
above-mentioned 2021 impairment charge of $80.3 million and, for
2022, higher equity income from the LGJV resulting from an increase
in revenue due to strong production from the CLG mine. Comparisons
against 2021 are based on the restated financial statements.
Corporate Update
On June 13, 2023, the Company reached an agreement in principle
to settle the U.S. class action lawsuit for a payment by the
Company and its insurers of $21 million to a settlement fund which
the Company expects will result in a disbursement by the Company of
no more than $7.9 million. The settlement is subject to certain
customary conditions, including class certification and approval of
the settlement by the U.S. District Court for the District of
Colorado.
The 2023 mineral reserve and mineral resource estimate update,
including a new life of mine plan, is expected to be announced
prior to the end of the third quarter, incorporating drill results
from surface and underground holes completed in 2022 and in Q1
2023. The LGJV currently has six surface drill rigs active on the
South-East Deeps zone, and three underground drill rigs operating
in in the NW and Central zones with a view to further defining and
expanding mineral resources.
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, the Company is
primarily focused on operating the Cerro Los Gatos mine and on
growth and development of the Los Gatos district. The LGJV consists
of 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.
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 Performance
Measures
The Company uses 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 AISC (defined above) 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, the Company believes 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 new project spending, tax payments, dividends, and financing
costs are not included.
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 all-in sustaining costs and
(iv) by-product all-in sustaining costs for our operations.
CLG 100% Basis |
Year Ended |
|
December 31, |
Amounts in thousands unless otherwise stated |
|
2022 |
|
|
2021 |
|
Cost of
sales |
$ |
107,075 |
|
$ |
97,710 |
|
Royalties |
|
3,069 |
|
|
4,781 |
|
Exploration |
|
9,800 |
|
|
5,383 |
|
General
and administrative |
|
14,307 |
|
|
13,345 |
|
Depreciation, depletion and amortization |
|
69,380 |
|
|
52,402 |
|
Expenses |
$ |
203,631 |
|
$ |
173,621 |
|
Depreciation, depletion and amortization |
|
(69,380 |
) |
|
(52,402 |
) |
Exploration1 |
|
(9,800 |
) |
|
(5,383 |
) |
Treatment and refining costs2 |
|
21,871 |
|
|
21,601 |
|
Cash
costs |
|
146,322 |
|
|
137,437 |
|
Sustaining capital |
|
76,526 |
|
|
72,979 |
|
All-in
sustaining costs |
|
222,848 |
|
|
210,416 |
|
By-product credits3 |
|
(125,782 |
) |
|
(103,571 |
) |
All-in
sustaining costs, net of by-product credits |
$ |
97,066 |
|
$ |
106,845 |
|
Cash
costs, net of by-product costs |
|
20,540 |
|
|
33,866 |
|
|
|
|
Payable
ounces of silver equivalent4 |
|
15,552 |
|
|
11,045 |
|
Co-product cash cost per ounce of payable silver equivalent |
$ |
9.41 |
|
$ |
12.44 |
|
Co-product all-in sustaining cost per ounce of payable silver
equivalent |
$ |
14.33 |
|
$ |
19.05 |
|
|
|
|
Payable
ounces of silver |
|
9,482 |
|
|
6,797 |
|
By-product cash cost per ounce of payable silver |
$ |
2.17 |
|
$ |
4.98 |
|
By-product all-in sustaining cost per ounce of payable silver |
$ |
10.24 |
|
$ |
15.72 |
|
1 Exploration costs are not related to current
mining operations.2 Represent reductions on customer invoices and
included in Revenue of the LGJV combined statement of income
(loss). 3 By-product credits reflect realized metal prices of zinc,
lead and gold for the applicable period. 4 Silver equivalents
utilize the average realized prices during the twelve months ended
December 31, 2022 of $20.72/oz silver, $1.58/lb zinc, $0.90/lb lead
and $1,678/oz gold and average realized prices during the twelve
months ended December 31, 2021 of $24.38/oz silver, $1.38/lb zinc,
$1.01/lb lead and $1,761/oz gold.
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 the potential settlement of the U.S. class
action, timing of an updated mineral resource and reserve report
and life of mine plan, drilling in CLG mine zones and potential
resource delineation and expansion, exploration in the Los Gatos
district, and production and cost guidance for 2023 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 NiekerkChief Financial
Officerinvestors@gatossilver.com(604) 424-0984
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