Gatos Silver, Inc. (NYSE/TSX: GATO) (“Gatos Silver” or the
“Company”) today reported unaudited operating and financial results
for the three (“Q2 2022”) and six (“H1 2022”) months ending June
30, 2022.
Highlights
- The Cerro Los Gatos (“CLG”) mine achieved record production of
4.7 million ounces of silver, 22.0 million pounds of lead and 29.3
million pounds of zinc in H1 2022.
- A record 11.8 million pounds of lead and 15.6 million pounds of
zinc were produced in Q2 2022, together with record feed grades and
recoveries for silver, lead and zinc.
- Based on the continued record performance of the CLG mine in H1
2022, the Company expects its 2022 full year production performance
to be near the high end of the current guidance range for all
payable metals produced, with plant throughput levels of 2,700 tpd
or higher expected for the second half of 2022.
- Numerous cost reduction initiatives being implemented are
helping to offset inflationary pressures. Together with continued
strong by-product prices and volumes, we expect unit cost
performance to be near the low end of our current guidance range
for 2022 full year AISC after by-product credits.
- The Los Gatos Joint Venture (“LGJV”) had a cash balance of $40
million as of June 30, 2022.
- Subsequent to the end of June, the LGJV paid its second
dividend in the amount of $15 million to its partners in July 2022.
The Company’s share, after withholding taxes, was $10 million. To
date during 2022, the Company has received $16 million in cash
dividend payments from the LGJV.
- The Company strengthened the executive management team with the
appointments of André van Niekerk, Chief Financial Officer, and
James Woeller, Vice President, Corporate Development and Business
Improvement, effective July 1, 2022 and July 16, 2022,
respectively.
“The CLG operation continued to deliver strong operational and
financial results in the second quarter,” said Dale Andres, Chief
Executive Officer. “Despite weaker silver and base metal prices and
industry wide inflationary pressures, we remain on track to achieve
the lower end of our 2022 cost guidance range helped by our
business improvement projects and by-product credits. We have a
strong and experienced executive team in place, with a focus on
driving shareholder value. We have also significantly advanced work
on our mineral resources and mineral reserves and new life-of-mine
plan and expect to announce the results of this work before the end
of October 2022.”
Operating and Financial Highlights
LGJV (100% Basis)
Three Months Ended June
30,
Six Months Ended June
30,
Operating and Financial
Highlights
2022
2021
2022
2021
CLG Production
Tonnes milled (dmt)
211,350
230,656
446,335
435,821
Tonnes milled per day (dmt)
2,323
2,535
2,466
2,408
Feed Grades
Silver (g/t)
374
322
363
296
Gold (g/t)
0.38
0.35
0.34
0.33
Lead (%)
2.79
2.51
2.49
2.28
Zinc (%)
5.03
4.41
4.56
3.87
Recoveries*
Silver – in both lead and zinc
concentrates
90.4%
88.6%
90.1%
87.3%
Gold - in lead concentrate
48.9%
57.5%
52.7%
56.1%
Lead - in lead concentrate
90.5%
87.6%
89.9%
86.3%
Zinc - in zinc concentrate
66.4%
64.4%
65.4%
62.4%
Contained Metal Produced
Silver ounces (millions)
2.30
2.12
4.69
3.63
Gold ounces - in lead conc.
(thousands)
1.27
1.48
2.58
2.63
Lead pounds - in lead conc. (millions)
11.8
11.2
22.0
18.9
Zinc pounds - in zinc conc. (millions)
15.6
14.5
29.3
23.2
Financial – Unaudited (amounts in
millions)
Sales
$ 57.2
$ 75.0
$ 142.8
$ 121.3
Cost of sales
$ 27.8
$ 24.1
$ 52.3
$ 43.9
Royalties
$ 1.0
$ 1.4
$ 2.4
$ 2.3
G&A expenses
$ 3.6
$ 2.8
$ 6.9
$ 6.0
Other (income) expenses
$ 0.7
$ 3.4
$ (0.4)
$ 7 .3
Capital expenditures
$ 20.5
$ 18.4
$ 39.9
$ 30.6
*Recoveries are reported for payable
metals in the identified concentrate. Recoveries reported
previously in 2021 were based on total metal in both
concentrates.
CLG achieved record lead and zinc production during Q2 2022, an
increase of 5% and 8%, respectively, compared to the second quarter
of 2021, primarily due to higher feed grades and improved
recoveries. Construction of the new paste backfill plant is
progressing well and is on schedule for completion and
commissioning in the third quarter of 2022.
LGJV sales for the quarter ended June 30, 2022, decreased 24%
compared to the same period in 2021, primarily as a result of
negative $18 million mark-to-market adjustments due to decreases in
metal prices on outstanding sales at quarter end and 18% lower
realized silver prices, partially offset by higher zinc prices and
higher sales volumes of silver, lead, and zinc. Sales for the six
months ended June 30, 2022, were 18% higher compared to the same
period in 2021, primarily as a result of higher sales volumes and
higher lead and zinc prices, offset by lower silver prices.
Cost of sales increased 15% and 19%, for Q2 2022 and H1 2022,
respectively, compared to the same periods in 2021, primarily due
to higher production and sales volumes. Higher input costs related
to power and consumables also contributed to the increase in cost
of sales, partially offset by cost reduction efforts. We expect
additional cost savings in H2 2022 as we implement several cost
reduction initiatives, including lower power costs as we complete
the transition to a new contract based on 100% renewable supply and
as we convert to paste backfilling in the mine in the fourth
quarter.
Other expenses were significantly lower during both Q2 2022 and
H1 2022, compared to the same period in 2021 primarily due to lower
interest expenses and finance related arrangement fees in 2022.
Capital expenditures increased 11% and 30%, for Q2 2022 and H1
2022, respectively, compared to the same periods in 2021, primarily
due to additional sustaining projects being executed in the first
half of year including construction of the new paste backfill
plant, which is progressing well and is on schedule for completion
and commissioning in the third quarter of 2022.
Gatos Silver
Three Months Ended
Six Months Ended
Financial - Unaudited
June 30,
June 30,
Amounts in millions
2022
2021
2022
2021
Exploration expenses
$0.3
$0.7
$0.6
$0.9
G&A expenses
2.7
4.4
8.1
8.0
Amortization
0.1
0.0
0.1
0.0
Operating expense
$3.1
$5.1
$8.8
$8.9
G&A expenses for the quarter ended June 30, 2022, decreased
by 39% compared to the same period in 2021 primarily due to lower
stock-based compensation expenses and estimated bonuses, partially
offset by higher legal and consulting expenses.
Corporate Update
The Company had a cash balance of $7 million as of June 30,
2022. In July 2022, Gatos Silver received its share of the second
quarterly dividend paid by the LGJV in the amount of $10 million as
a result of the continued strong operating performance of the CLG
mine. The Company had debt outstanding of $13 million related to
the credit facility as of July 31, 2022, which has remained
unchanged from Q1 2022.
The Company continues to advance efforts to produce an updated
life-of-mine plan and update its mineral resources and mineral
reserves. This update will incorporate information since the CLG
mine commenced operation and will account for production mined
through to June 30, 2022. The mineral resources and mineral
reserves are being completely rebuilt from base data, including
data compilation of surface drilling, underground drilling,
underground mapping and production data, comprehensive data
validation, structural and geological interpretation, resource
estimation, reconciliation to actual production, and a new mine
design including updates to operating and capital costs. The
Company expects to produce a new CLG life-of-mine plan and
technical report before the end of October 2022.
The Company is also evaluating the material weaknesses in its
internal controls over financial reporting related to the mineral
reserve reporting errors. The Company’s financial statements for
the year ended December 31, 2021, and quarters ended March 31, 2022
and June 30, 2022, may be affected by the ongoing analysis.
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 LGJV, the Company is primarily focused on operating
the mine and mineral processing plant at the LGJV’s CLG deposit.
The LGJV consists of approximately 103,087-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 Tony Scott, Vice President of Evaluations and Technical
Services of Gatos Silver who is a “Qualified Person,” as defined in
NI 43-101 Standards of Disclosure for Mineral Projects of the
Canadian Securities Administrators.
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 CLG’s annual production and
cost guidance and future mill throughput rates, cost reduction
initiatives and anticipated benefits, timing of completion of the
new paste backfill plant, timing of a new CLG life-of-mine plan and
updated technical report and the outcomes of the Company’s
evaluation of the material weaknesses in its internal controls over
financial reporting 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20220810005670/en/
Investors and Media Contact Tiffany Osburn Director,
Financial Reporting and Corporate Communications
investors@gatossilver.com (720) 726-9662
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