- Silver production up 59% in Q3 2022 vs. Q3
2021
Gatos Silver, Inc. (NYSE/TSX: GATO) (“Gatos Silver” or the
“Company”) today announced record production results from its
70%-owned Cerro Los Gatos (“CLG”) mine for the quarter and nine
months ended September 30, 2022. Gatos Silver also announced that
it has increased production guidance and lowered cost guidance for
2022.
Dale Andres, CEO of Gatos Silver, commented: “Our continued
strong operating performance at CLG during the quarter reflects
planned production sequencing, with mill throughput exceeding
design capacity by 15% and with higher ore grades compared with a
year earlier. Our priority exploration and definition drilling
objectives are to extend our mine life by converting the
higher-grade portion of our current Mineral Resource into Reserves
and to follow up on the mineralization recently discovered at depth
in the new South-East Deeps zone while assessing its potential
implications for the entire Los Gatos district.”
Production Results (100% basis)
CLG achieved record production for silver, zinc and lead during
the third quarter of 2022. Silver production was 2.7 million ounces
of silver, an increase of 59% compared to the third quarter of
2021. Zinc production was 17.8 million pounds, up 32%, and lead
production was 12.2 million pounds, up 13% from the comparable
quarter in 2021.
The higher production was primarily due to record mill
throughput rates averaging 2,862 tonnes per day and significantly
higher ore grades processed during the quarter. Silver and zinc
recoveries were also higher than the comparable quarter in 2021.
Milling rates were 10% higher than the previous mill throughput
record achieved in the first quarter of 2022, and 23% higher than
the second quarter of 2022.
Increased third quarter 2022 output was supported by continued
debottlenecking efforts and planned production sequencing in the
highest-grade sections of the orebody, further helped by some
stopes achieving higher than planned grades. In the fourth quarter
we anticipate mined ore grades will be lower than the third
quarter, but processing rates are expected to be similar.
During the third quarter we completed a fourth lift of the
tailings dam on time and below budget. Construction of the paste
plant is progressing on time and on budget and is nearing
completion. We expect to start commissioning this month. We also
expect the paste plant to help increase productivity and lower
operating costs starting in the fourth quarter of 2022. We
completed the transition to our new 100% renewable power supply
contract in September, which together with other cost improvement
initiatives is also expected to help lower operating costs going
forward.
CLG comparative production highlights are summarized below:
Three Months Ended September
30,
Nine Months Ended September
30,
CLG Production (100% Basis)
2022
2021
2022
2021
Tonnes milled (dmt)
263,331
234,054
709,666
669,876
Tonnes milled per day (dmt)
2,862
2,544
2,600
2,454
Feed Grades
Silver (g/t)
356
256
361
282
Zinc (%)
4.70
4.10
4.61
3.95
Lead (%)
2.38
2.35
2.45
2.30
Gold (g/t)
0.34
0.30
0.34
0.32
Contained Metal
Silver ounces (millions)
2.70
1.70
7.40
5.33
Zinc pounds - in zinc conc. (millions)
17.8
13.5
47.1
36.7
Lead pounds - in lead conc. (millions)
12.2
10.8
34.2
29.7
Gold ounces - in lead conc.
(thousands)
1.40
1.30
3.98
3.92
Recoveries1
Silver – in both lead and zinc
concentrates
89.6%
88.6%
89.9%
87.7%
Zinc - in zinc concentrate
65.4%
63.9%
65.4%
62.9%
Lead - in lead concentrate
88.5%
89.1%
89.4%
87.3%
Gold - in lead concentrate
48.9%
56.5%
51.3%
56.2%
Based on the continued strong operating performance of CLG, the
Company is improving 2022 full year production guidance for silver
by 9%2. The Company is providing even higher increases in guidance
for zinc, lead and gold. At the same time, Gatos Silver now expects
lower 2022 full year all-in sustaining costs (AISC)3. On a
by-product basis, the Company has reduced guidance by 14%2.
The guidance improvements are shown in the table below:
CLG 2022 Full Year Guidance (100%
Basis)
Previous
Current
Production Guidance – Contained Metal
Silver ounces (millions)
8.50 – 9.00
9.35 – 9.65
Zinc pounds – in zinc conc. (millions)
49 – 54
58 – 61
Lead pounds – in lead conc. (millions)
36 – 40
43 – 45
Gold ounces – in lead conc.
(thousands)
4.0 – 4.5
5.0 – 5.3
All-in Sustaining Cost (AISC)3
Co-product basis ($/oz AgEq payable)
$16.50 – $18.50
$15.50 – $16.50
By-product basis ($/oz Ag payable)
$13.00 – $15.00
$11.50 – $12.50
The Company expects sustaining capital expenditures to be
approximately $75 million in 2022. We expect sustaining capital
expenditures to drop significantly in 2023 with the completion of
the paste plant in the fourth quarter of 2022 and with no
significant tailings dam construction expenditures required next
year.
Corporate Update
As previously disclosed, Gatos Silver is in the process of
transitioning its executive office from Denver, Colorado to
Vancouver, British Columbia, Canada which is expected to be
completed during the fourth quarter of 2022, and we continued to
strengthen the executive management team with the previously
announced appointment of Steve Bodley as our new General Counsel
and Chief Compliance Officer.
The Los Gatos Joint Venture (“LGJV”) had a cash balance of $39
million as of September 30, 2022, virtually unchanged from $40
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 continued strong operating
performance of the CLG mine. The Company had a cash balance of $15
million and debt outstanding of $13 million related to our credit
facility as of September 30, 2022.
On October 3, 2022, the Company announced an updated CLG Mineral
Reserve Estimate, Mineral Resource Estimate and Life of Mine plan
and expects to produce a new technical report at the end of October
2022.
As announced on September 30, 2022, the Company is diligently
working to identify and engage an auditor licensed in British
Columbia, Canada to conduct the audit and review of our financial
statements. While the Company is continuing to evaluate material
weaknesses in its internal controls over financial reporting
related to the mineral reserve reporting errors, the Company
expects that it will determine that at least one material weakness
exists. The Company is still evaluating the extent of this and
other potential material weaknesses. The Company anticipates
completing an impairment assessment based on the 2022 Mineral
Reserve in the fourth quarter of 2022 and is working towards
completing all outstanding SEC and OSC filings as soon as
practicable.
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 mine and mineral processing
plant at the LGJV’s Cerro Los Gatos 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 Anthony (Tony) Scott, P.Geo., Vice President of
Evaluations 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
AISC includes total production cash costs incurred at the LGJV’s
mining operations (including all direct and indirect operating cash
costs related to the physical activities of producing metals,
including mining, processing and other plant costs, treatment and
refining costs, freight and handling, general and administrative
costs and royalties) plus sustaining capital expenditures and
reclamation accretion expense and excludes Gatos Silver and Dowa
corporate costs and allocations paid by the LGJV. AISC after
by-product credits includes the AISC costs minus revenues from the
sale of zinc, lead and gold. 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.
This non-GAAP financial measure is intended to provide additional
information only and does 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.
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
AISC guidance and future mill throughput rates, expectations
regarding future operating costs and capital expenditures, timing
of an 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. Certain
forward-looking information should also be considered
future-oriented financial information or financial outlook
(collectively, “FOFI”) as such terms are defined in Canadian
National Instrument 51-102. The purpose of disclosing FOFI is to
provide a general overview of management’s expectations regarding
the anticipated results of operations and readers are cautioned
that FOFI may not be appropriate for other purposes.
Forward-looking statements are based on management’s beliefs and
assumptions and on information currently available to management,
including without limitation assumptions about commodity prices,
mining methodologies, the accuracy of Mineral Reserve and Resource
estimates, operating and capital costs, plant throughput and
processing recoveries, favourable operating conditions, and
including other assumptions to be set out in the 2022 Technical
Reports. Such statements are subject to risks and uncertainties,
and actual results may differ materially from those expressed or
implied in the forward-looking statements, including without
limitation, commodity prices, change in regulations, failure to
retain or obtain permits and licenses, environmental risks, cost
and timing of exploration, development and production, opposition
to mining may arise, labour interruptions, other general risks
associated with mining operations 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.
_______________ 1 Recoveries are reported for payable metals in
the identified concentrate. Recoveries reported previously in 2021
were based on total metal in both concentrates. 2 Percentage change
in guidance is based on the mid-point of current and previous
guidance ranges. 3 AISC is a non-GAAP measure. See “Non-GAAP
Financial Performance Measures” for additional information. The
Company does not provide a reconciliation of forward-looking AISC
to the GAAP measure of the LGJV expenses due to the inherent
difficulty in forecasting and quantifying certain amounts that are
necessary for such reconciliation, and as a result, is not able to
provide a reconciliation of AISC without unreasonable effort. The
amount of the non-GAAP adjustments may be material and, therefore,
could result in projected AISC being materially different than
projected LGJV GAAP expenses.
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version on businesswire.com: https://www.businesswire.com/news/home/20221011006013/en/
Investors and Media Contact Tiffany Osburn Director,
Financial Reporting and Corporate Communications
investors@gatossilver.com (720) 726-9662
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