Gatos Silver, Inc. (NYSE/TSX: GATO) (“Gatos Silver” or the
“Company”) today reported an updated life of mine plan (the “2024
LOM Plan”) that adds two years of additional reserves and a 36%
increase in silver equivalent production compared with the prior
LOM plan at the Cerro Los Gatos Mine (“CLG”) in Mexico.
Gatos Silver also disclosed an updated mineral
reserve estimate (the “2024 Mineral Reserve”) and mineral resource
estimate (the “2024 Mineral Resource”) (and together with the 2024
LOM Plan, the “2024 Updates”) with an effective date of July 1,
2024.
The Company has a 70% interest in the Los Gatos
Joint Venture (“LGJV”), which in turn owns the CLG mine. The
Company has agreed to be acquired by First Majestic Silver Corp.
(“First Majestic”) subject to certain conditions, including
approvals of the shareholders of Gatos Silver and First Majestic.
All dollar amounts are expressed in, and references to “$” refer
to, United States dollars unless otherwise noted.
Dale Andres, CEO of Gatos Silver, said: “We
continue to deliver on CLG’s growth potential through disciplined
optimization of our assets and successful near-mine resource
expansion and conversion. The 2024 LOM Plan represents our second
consecutive multi-year mine life extension with the current mine
life now extended to the end of 2032 in conjunction with higher
mill throughput rates, which are now expected to exceed design
capacity by 40% starting in mid-2025.”
“The 2024 LOM Plan shows strong cash flows and
attractive all-in-sustaining costs that demonstrate why CLG is one
of the highest-quality primary silver operations. Together with
ongoing exploration drilling, the results of the 2024 Updates
illustrate the long-term potential at CLG and why it is expected to
become a cornerstone district of the First Majestic portfolio going
forward.”
Summary
-
Robust 2024 LOM Plan at CLG with strong annual cash flow profile
(100% LGJV basis):
-
Mine life extended to the end of 2032, an addition of two years at
higher throughput rates of 3,500 tonnes per day
-
Low by-product all-in sustaining cost (“AISC”)1,2 of $6.29 per
ounce of payable silver, and co-product AISC1,2 of $14.89 per
ounce of payable silver equivalent
-
Average annual after-tax free cash flow2,3 of $80 million,
resulting in an after-tax net present value (“NPV”)3 of $539
million based on 2024 reserve price assumptions at a silver price
of $23/oz, and significant leverage to higher metal prices. The
spot silver price on September 24, 2024 was $32.15/oz (XAG:USD)4.
- Average annual after-tax free cash flow2,5 of $111
million, resulting in an after-tax NPV5 of $760 million, at a
silver price of $30/oz
-
Average annual after-tax free cash flow2,5 of $136 million,
resulting in an after-tax NPV5 of $935 million, at a silver
price of $35/oz
-
Total silver equivalent production6 over the LOM expected to
increase by 36% and total silver production expected to increase by
22%
-
Average annual production of 7.0 million ounces of silver and 14.0
million ounces of silver equivalent expected during the 2025 to
2027 period with further optimization potential
-
Average annual production over the LOM of 6.1 million ounces of
silver, 67 million pounds of zinc and 50 million pounds of lead, or
12.9 million ounces of silver equivalent production
-
2024 Mineral Reserve of 10.3 million tonnes at 172 g/t silver,
3.89% zinc, 2.07% lead, 0.22 g/t gold and 0.21% copper, with 57.3
million ounces of contained silver, up 28% from 8.1 million tonnes
a year earlier7. For all of the mine’s five payable metals (silver,
zinc, lead, gold and copper), contained metal increased even though
grade was lower for all except copper.
-
2024 Mineral Resource includes 0.8 million tonnes of measured and
indicated resource, up 98% from 0.4 million tonnes a year earlier
and 1.51 million tonnes of inferred resource, down 67% from 4.58
million tonnes a year earlier7, reflecting successful resource to
reserve conversion
-
Numerous opportunities to extend mine life and further increase
margins at CLG:
-
Drilling continues to expand the SE Deeps zone beyond the 2024
Mineral Reserve and Mineral Resource estimates, as described in our
news release dated July 23, 2024
-
Two drill rigs currently drilling the Central Deeps target below
the current Central and North-west zones
-
Drilling of near-mine and district exploration targets increased in
Q2 2024 with initial results at San Luis and Portigueño targets
showing mineralization, as described in our news release dated July
23, 2024, and with follow-up drilling continuing
-
Several capital efficient margin improvement projects being
studied, including metallurgical recovery optimization through
ultra fines recovery and potential mill throughput growth up to
4,000 tpd
2024 CLG LOM Plan Update Summary
Table 1 presents a comparison of key metrics of
the 2024 LOM Plan to the previous life of mine plan announced on
September 6, 2023, (the “2023 LOM Plan”) considering the comparable
periods from July 1, 2024 onwards (the effective date of the 2024
LOM Plan).
On this basis, total estimated silver equivalent
production in the 2024 LOM Plan has increased by 36% compared with
the 2023 LOM Plan, with lower unit operating costs resulting
primarily from higher mill throughput rates which increase to a
steady state of approximately 3,500 tpd by mid-2025.
Total tonnes processed increased by 47% to 10.33 million
tonnes. Sustaining capital increases by 63% reflecting additional
underground development and infrastructure required to mine the
additional tonnage. Silver equivalent production averages 12.9
million ounces per year over the mine life, and averages 14.0
million ounces during the 2025 to 2027 period. Figures 1, 2, 3 and
4 present annual and cumulative free cash flows, mill throughput
rates and silver head grades, silver production and by-product
AISC, and silver equivalent production and co-product AISC,
respectively.
Table 1 – Summary of the 2024 LOM Plan and Comparison to
the 2023 LOM Plan (100% LGJV
Basis)(1,2,3)
|
LOM Plan comparisons are presented from July 1, 2024
through to end of respective mine lives |
2024 LOM Plan(H2’24+) |
2023 LOM Plan(H2’24+) |
Change |
Change (%) |
|
End of Mine Life |
Oct. 31, 2032 |
Dec. 31, 2030 |
|
|
|
Total Tonnes Processed (Mt) |
10.33 |
7.01 |
3.33 |
47% |
|
Average Mill Throughput Rate (tpd) |
3,401 |
2,951 |
450 |
15% |
|
Total Silver Production (Moz) |
50.5 |
41.3 |
9.1 |
22% |
|
Total Silver Equivalent Production (Moz)(1) |
107.2 |
78.6 |
28.5 |
36% |
|
Average Silver Production (Moz / year)(2) |
6.1 |
6.4 |
(0.3) |
(5)% |
|
Average Zinc Production (Mlbs / year)(2) |
67.2 |
63.7 |
3.5 |
5% |
|
Average Lead Production (Mlbs / year)(2) |
50.0 |
46.8 |
3.2 |
7% |
|
Average Silver Equivalent Production (Moz / year)(1) |
12.9 |
12.1 |
0.8 |
6% |
|
|
|
Site Operating Costs ($/tonne milled) |
$82.14 |
$87.72 |
($5.58) |
(6)% |
|
Sustaining Capital ($M) |
$186.9 |
$114.7 |
$72.19 |
63% |
|
By-Product AISC ($/oz Ag pay.)(3) |
$6.29 |
$7.22 |
($0.94) |
(13)% |
|
Co-Product AISC ($/oz AgEq pay.)(3) |
$14.89 |
$14.17 |
$0.72 |
5% |
(1) Silver equivalent production for the 2024
LOM Plan is calculated using 2024 reserve price assumptions to
“convert” zinc, lead, gold and copper production contained in
concentrates to “equivalent” silver ounces (contained metal,
multiplied by price, divided by silver price). Silver equivalent
production for the 2024 LOM Plan uses 2024 reserve price
assumptions of $23/oz silver, $1.25/lb zinc, $0.95/lb lead,
$1,850/oz gold and $4.00/lb copper. Silver equivalent production
for the 2023 LOM Plan did not include copper due to relatively low
payable quantities, and used prices of $22/oz silver, $1.20/lb
zinc, $0.90/lb lead, $1,700/oz gold, $3.50/lb
copper.(2) Silver production is silver contained
in Pb, Zn and Cu concentrates, zinc production is zinc contained in
Zn concentrate, lead production is lead contained in Pb
concentrate. (3) By-product AISC and Co-product
AISC include the LGJV management fee and administrative costs of
$1.35 / oz Ag payable and $0.65 / oz AgEq payable, respectively in
the 2024 LOM Plan and $1.13 / oz Ag payable and $0.60 / oz AgEq
payable, respectively in the 2023 LOM Plan from July 1, 2024. Refer
to Table 9 for AISC details.
Figure 1 – 2024 LOM Annual Free Cash Flow (100% LGJV
Basis)
Figure 2 – LOM Mill Throughput and Silver Grade (2024
LOM Plan and 2023 LOM Plan)
Figure 3 – 2024 LOM Silver Production and By-Product
AISC (100% LGJV Basis)
Figure 4 – 2024 LOM Silver Equivalent Production and
Co-Product AISC (100% LGJV Basis)
2024 CLG Mineral Reserve and Mineral Resource
Tables
The 2024 Mineral Reserve for CLG by reserve category is
summarized in Table 2 and the 2024 Mineral Resource for CLG
reported by category is summarized in Table 3.
Table 2: 2024 CLG Mineral Reserve as at
July 1, 2024
(1,2,3,4,5,6,7,8,9,10)
|
100% LGJV Basis |
Mt |
Ag(g/t) |
Zn(%) |
Pb(%) |
Au(g/t) |
Cu(%) |
Ag (Moz) |
Zn (Mlbs) |
Pb (Mlbs) |
Au(koz) |
Cu(Mlbs) |
|
Proven |
3.49 |
300 |
4.35 |
2.09 |
0.29 |
0.09 |
33.6 |
334.4 |
160.6 |
32.6 |
7.0 |
|
Probable |
6.85 |
107 |
3.66 |
2.06 |
0.18 |
0.26 |
23.6 |
552.3 |
310.9 |
40.5 |
40.0 |
|
Proven and Probable |
10.33 |
172 |
3.89 |
2.07 |
0.22 |
0.21 |
57.3 |
886.7 |
471.4 |
73.1 |
46.9 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
70% GSI Attributable Basis |
Mt |
Ag(g/t) |
Zn(%) |
Pb(%) |
Au(g/t) |
Cu(%) |
Ag(Moz) |
Zn(Mlbs) |
Pb(Mlbs) |
Au(koz) |
Cu(Mlbs) |
|
Proven |
2.44 |
300 |
4.35 |
2.09 |
0.29 |
0.09 |
23.5 |
234.1 |
112.4 |
22.8 |
4.9 |
|
Probable |
4.80 |
107 |
3.66 |
2.06 |
0.18 |
0.26 |
16.5 |
386.6 |
217.6 |
28.4 |
28.0 |
|
Proven and Probable |
7.23 |
172 |
3.89 |
2.07 |
0.22 |
0.21 |
40.1 |
620.7 |
330.0 |
51.2 |
32.8 |
(1) Mineral Reserves are reported on a 100%
LGJV basis and 70% GSI attributable basis and exclude all Mineral
Reserve material mined prior to July 1,
2024.(2) Specific gravity has been assumed on a
dry basis.(3) Tonnage and contained metal have
been rounded to reflect the accuracy of the estimate and numbers
may not sum exactly.(4) Values are inclusive of
mining recovery and dilution. Values are determined as of delivery
to the mill (point of reference) and therefore not inclusive of
milling recoveries.(5) Mineral Reserves are
reported within stope shapes using a variable cut-off basis with a
Ag price of US$23/oz, Zn price of US$1.25/lb, Pb price of
US$0.95/lb, Au price of US$1,850/oz and Cu price of $4.00/lb.
Metallurgical recoveries used in the NSR calculation for generation
of the stope solids vary based on the block Pb:Cu ratio. For a
Pb:Cu ratio >15 the NSR metallurgical recovery parameters were
88.2% Ag, 63.4% Zn, 89.4% Pb, 54.2% Au and 0% Cu, for Pb:Cu of
>7 and <15, the NSR metallurgical recovery parameters were
88.2% Ag, 63.4% Zn, 89.4% Pb, 54.2% Au and 60% Cu and for Pb:Cu
ratio of <7 the NSR metallurgical recovery parameters used were
88.2% Ag, 63.4% Zn, 87.2% Pb, 54.2% Au and 82% Cu. The
metallurgical recovery parameters in the economic analysis, after
plant production modelling, average 88.2% Ag, 63.1% Zn, 88.5% Pb,
54.2% Au and 71.5% Cu to concentrates where the metal is
payable.(6) The Mineral Reserve is reported on a
fully diluted basis defined by mining method, stope geometry and
ground conditions.(7) Contained Metal (CM) is
calculated as follows:
- Zn, Pb and Cu, CM (Mlb) = Tonnage (Mt) * Grade (%) / 100 *
2204.6
- Ag and Au, CM (Moz) = Tonnage (Mt) * Grade (g/t) / 31.1035 ;
multiply Au CM (Moz) by 1000 to obtain Au CM (koz)
(8) Under SEC Regulation S-K 1300, a Mineral
Reserve is an estimate of tonnage and grade or quality of indicated
and measured mineral resources that, in the opinion of the
qualified person, can be the basis of an economically viable
project. More specifically, it is the economically mineable part of
a measured or indicated mineral resource, which includes diluting
materials and allowances for losses that may occur when the
material is mined or extracted. (9) The SEC
definitions for Mineral Reserves in Regulation S-K 1300 were used
for Mineral Reserve classification and are consistent with Canadian
Institute of Mining, Metallurgy and Petroleum (CIM) Definition
Standards for Mineral Resources and Mineral Reserves (CIM (2014)
definitions). (10) The Mineral Reserve estimates
were prepared under the supervision of Mr. Stephan Blaho, P.Eng. an
employee of WSP Canada Inc. who is the independent Qualified Person
for these Mineral Reserve estimates.
Table 3: 2024 CLG Mineral
Resource as at July 1, 2024 (Exclusive of Mineral
Reserves)
(1,2,3,4,5,6,7,8,9,10,11)
|
100% LGJV Basis |
Mt |
Ag(g/t) |
Zn(%) |
Pb(%) |
Au(g/t) |
Cu(%) |
Ag(Moz) |
Zn(Mlbs) |
Pb(Mlbs) |
Au(koz) |
Cu(Mlbs) |
|
Measured |
0.24 |
222 |
2.78 |
1.51 |
0.36 |
0.07 |
1.7 |
14.7 |
8.0 |
2.8 |
0.3 |
|
Indicated |
0.55 |
75 |
3.71 |
2.00 |
0.21 |
0.25 |
1.3 |
44.8 |
24.1 |
3.7 |
3.1 |
|
Measured and Indicated |
0.79 |
120 |
3.43 |
1.85 |
0.26 |
0.20 |
3.0 |
59.5 |
32.0 |
6.5 |
3.4 |
|
Inferred |
1.51 |
80 |
4.22 |
2.01 |
0.22 |
0.29 |
3.9 |
140.2 |
66.9 |
10.5 |
9.5 |
|
|
|
70% GSI Attributable Basis |
Mt |
Ag(g/t) |
Zn(%) |
Pb(%) |
Au(g/t) |
Cu(%) |
Ag(Moz) |
Zn(Mlbs) |
Pb(Mlbs) |
Au(koz) |
Cu(Mlbs) |
|
Measured |
0.17 |
222 |
2.78 |
1.51 |
0.36 |
0.07 |
1.2 |
10.3 |
5.6 |
2.0 |
0.2 |
|
Indicated |
0.38 |
75 |
3.71 |
2.00 |
0.21 |
0.25 |
0.9 |
31.4 |
16.9 |
2.6 |
2.1 |
|
Measured and Indicated |
0.55 |
120 |
3.43 |
1.85 |
0.26 |
0.20 |
2.1 |
41.6 |
22.4 |
4.6 |
2.4 |
|
Inferred |
1.06 |
80 |
4.22 |
2.01 |
0.22 |
0.29 |
2.7 |
98.2 |
46.8 |
7.4 |
6.7 |
(1) Mineral Resources are reported on a 100%
LGJV basis and 70% GSI attributable basis and are exclusive of
Mineral Reserves.(2) Under SEC Regulation S-K
1300, a Mineral resource is a concentration or occurrence of
material of economic interest in or on the Earth's crust in such
form, grade or quality, and quantity that there are reasonable
prospects for economic extraction. A mineral resource is a
reasonable estimate of mineralization, taking into account relevant
factors such as cut-off grade, likely mining dimensions, location
or continuity, that, with the assumed and justifiable technical and
economic conditions, is likely to, in whole or in part, become
economically extractable. It is not merely an inventory of all
mineralization drilled or sampled. Mineral Resources which are not
Mineral Reserves do not have demonstrated economic viability. The
estimate of Mineral Resources may be materially affected by
environmental, permitting, legal, marketing, or other relevant
issues.(3) The SEC definitions for Mineral
Resources in S-K 1300 were used for Mineral Resource classification
which are consistent with Canadian Institute of Mining, Metallurgy
and Petroleum (CIM) Definition Standards for Mineral Resources and
Mineral Reserves (CIM (2014) definitions).(4) The
quantity and grade of reported Inferred Mineral Resources in this
estimation are uncertain in nature and there has been insufficient
exploration to define these Inferred Mineral Resources as an
Indicated or Measured Mineral Resource. It is uncertain if further
exploration will result in upgrading Inferred Mineral Resources to
an Indicated or Measured Mineral Resource
category.(5) Specific gravity has been assumed on
a dry basis.(6) Tonnage and contained metal have
been rounded to reflect the accuracy of the estimate and numbers
may not sum exactly.(7) Mineral Resources exclude
all Mineral Resource material mined prior to July 1,
2024.(8) Mineral Resources are reported within
stope shapes using a $70.94/tonne net smelter return (“NSR”)
cut-off calculated using an Ag price of US$23/oz, Zn price of
US$1.25/lb, Pb price of US$0.95/lb, Au price of US$1,850/oz and Cu
price of $4.00/lb. The NSR cutoff includes mill recoveries and
payable metal factors appropriate to the existing CLG processing
circuit augmented with a pyrite leach circuit and copper separation
circuit. The milling recoveries for these additional projects is
based on existing metallurgical testwork. The metallurgical
recoveries that are used as inputs to the resource NSR are 93.2%
Ag, 63.4% Zn, 61.1% Au and range between 87.2%-89.4% Pb and between
66.5%-82.0% Cu.(9) No dilution was applied to the
Mineral Resource which are reported on an insitu basis (point of
reference).(10) Contained Metal (CM) is calculated
as follows:
- Zn, Pb and Cu CM (Mlb) = Tonnage (Mt) * Grade (%) / 100 *
2204.6
- Ag and Au, CM (Moz) = Tonnage (Mt) * Grade (g/t) / 31.1035 ;
multiply Au CM (Moz) by 1000 to obtain Au CM (koz)
(11) The Mineral Resource estimates were
prepared under the supervision of Ronald Turner, MAusIMM(CP) an
employee of Golder Associates S.A. who is the independent Qualified
Person for these Mineral Resource estimates.
Diamond Drilling
The increases in mineral reserve and mineral
resource are primarily driven by extensive diamond drilling
completed between the 2023 and 2024 updates. The 2024 Mineral
Resource update for CLG used a total of 1,666 diamond drill holes
totaling 346,639 metres. Between the updates, data from 53,689
metres of surface resource drilling from 75 holes and 12,354 metres
of underground definition drilling from 118 holes was added to the
database; these new drillholes are shown in Figure 5 below. The
data cut-off date used for the 2024 Updates was March 31, 2024.
Various control measures are in place at CLG to
ensure reliable drilling data for estimation, including a secure
database system, quality assurance and quality control measures and
periodic reporting and gyro downhole surveying for surface drill
holes.
Figure 5 – New Drilling Added between
2023 and 2024 Mineral Reserve and Mineral Resource
Updates
Mineral Resource Estimation
The 2024 Mineral Resource uses an estimation
methodology that is similar to the methodology used for the 2023
mineral resource estimate. Geological interpretation of 3D domain
solids was completed using all available information including
detailed underground mapping, channel sampling and surface and
underground diamond drilling. The block model estimation uses assay
information from diamond drill core only. The model interpolation
is by multiple pass ordinary kriging using locally varying
anisotropy to follow the changes in dip and azimuth of the veins.
Control of outlier grades is by traditional top cutting. The limits
set for the top cut were based on statistical analysis and
comparison of mined areas to actual production. CLG mineral
resources are reported exclusive of mineral reserves and within
stope shapes to define reasonable prospects of economic
extraction.
Changes from 2023 are the change from high grade
restriction to top cutting and the removal of the fourth estimation
pass with longer ranges that was previously used for inferred
resource only.
2024 Mine Design and Scheduling
The methodology used to prepare the 2024 mine
design is similar to the methodology that was implemented for the
2023 updates, with updates to account for changes in actual
operating performance.
Long-hole (“LH”) mining methods were applied
where amenable throughout the mine which represents approximately
73% of total LOM stope production. Stope production in the mine
plan varies between approximately 55% to 80% LH in 2025-2028,
increasing to greater than 90% LH towards the end of the mine life.
Areas that are not amenable to LH mining are planned to be
extracted using cut and fill (“C+F”) methods. See Figure 6 below
for a comparison of the 2024 mine design versus the 2023 mine
design.
Mineral reserve stopes are planned to be filled
using primarily paste fill, with uncemented rock fill and, to a
lesser extent cemented rock fill, also considered in certain stopes
and areas.
Mine dilution and mine recovery estimates are
based on recent actual operating performance. These assumptions are
applied based on the mining method, stope width, zone inclination
and proximity to hanging-wall faults.
Operating and sustaining capital cost
assumptions are based on recent actual costs with minor allowances
for business improvement initiatives that are defined and being
implemented. Mine operating costs were developed separately for LH
and C+F mining methods.
Figure 6 – Long Section of CLG 2024 and
2023 Mineral Reserve Solids
2024 LOM Production Plan
The 2024 LOM Plan is based on a steady-state
processing rate of 3,500 tonnes per day from mid-2025 onwards,
resulting in a mine plan that exhausts current mineral reserves in
Q4 2032. Steady-state LOM mining rates are approximately 8% higher
than current operating rates and are projected to steadily increase
through the end of 2024 and first half of 2025. Underground
development for mining the 2024 Mineral Reserve is expected to be
materially complete by 2030.
Mineral processing at the current operation uses
conventional sulphide flotation, producing separate lead and zinc
concentrates. The 2024 LOM considers the installation of a
copper-lead separation circuit to produce a separate copper
concentrate from higher copper mill feeds, which is expected to be
operational in 2026. Predicted metallurgical recoveries over the
2024 LOM Plan average 88.2%, 63.1%, 88.5%, 54.2% and 71.5% for
silver, zinc, lead, gold and copper, respectively. Recoveries were
estimated based on recent actual plant performance, as well as
recent metallurgical test work on South-East zone copper-lead
separation. A total of 107.2 million ounces of silver equivalent
are estimated to be produced according to the 2024 LOM Plan,
comprised of 50.5 million ounces of silver, 560 million pounds of
zinc, 417 million pounds of lead, 39.6 thousand ounces of gold and
33.5 million pounds of copper.
Production and recovery numbers are calculated
based on metals recovered to concentrates where the grades are
expected to be in payable quantities. Silver production and
recoveries are silver contained in lead, zinc and copper
concentrates; zinc production and recoveries are zinc contained in
zinc concentrate; lead production and recoveries are lead contained
in lead concentrate; gold production and recoveries are gold
contained in lead and copper concentrates; and copper production
and recoveries are copper contained in lead and copper
concentrates.
Table 4: Life of Mine Projected
Processing and Production Summary (100% LGJV
Basis)(1)
|
Plant Metrics |
Units |
H22024 |
2025 |
2026 |
2027 |
2028 |
2029 |
2030 |
2031 |
2032 |
LOM |
|
Processed Material |
Mt |
0.60 |
1.26 |
1.28 |
1.28 |
1.28 |
1.28 |
1.28 |
1.16 |
0.93 |
10.33 |
|
Process Rate |
tpd |
3,247 |
3,444 |
3,500 |
3,500 |
3,500 |
3,500 |
3,500 |
3,166 |
3,055 |
3,401 |
|
Ag Grade |
g/t |
260 |
221 |
193 |
167 |
154 |
153 |
153 |
146 |
141 |
172 |
|
Zn Grade |
% |
4.02 |
4.30 |
4.42 |
4.05 |
3.98 |
4.22 |
3.35 |
3.30 |
3.24 |
3.89 |
|
Pb Grade |
% |
1.89 |
2.04 |
2.13 |
2.10 |
2.12 |
2.13 |
1.99 |
2.05 |
2.09 |
2.07 |
|
Au Grade |
g/t |
0.26 |
0.23 |
0.25 |
0.20 |
0.22 |
0.24 |
0.21 |
0.19 |
0.18 |
0.22 |
|
Cu Grade |
% |
0.09 |
0.12 |
0.12 |
0.14 |
0.16 |
0.21 |
0.37 |
0.33 |
0.27 |
0.21 |
|
Ag Production |
Moz |
4.4 |
7.9 |
7.0 |
6.0 |
5.6 |
5.5 |
5.5 |
4.8 |
3.7 |
50.5 |
|
Zn Production |
Mlbs |
33.4 |
75.2 |
78.7 |
72.0 |
71.0 |
75.1 |
59.5 |
53.1 |
42.0 |
559.9 |
|
Pb Production |
Mlbs |
22.2 |
50.6 |
53.3 |
52.6 |
53.0 |
52.8 |
49.0 |
45.7 |
37.8 |
417.0 |
|
Au Production |
koz |
2.8 |
5.1 |
5.6 |
4.5 |
4.9 |
5.4 |
4.6 |
3.8 |
3.0 |
39.6 |
|
Cu Production |
Mlbs |
0.7 |
2.0 |
0.9 |
2.8 |
3.4 |
4.5 |
8.4 |
6.7 |
4.2 |
33.5 |
|
AgEq Production |
Moz |
7.5 |
14.8 |
14.1 |
13.0 |
12.6 |
13.0 |
12.6 |
11.0 |
8.6 |
107.2 |
(1) LOM begins on July 1, 2024. The 2024
Mineral Reserve excludes all mineral reserve material processed
prior to July 1, 2024.
CLG’s short term definition drilling and short
term mine plan updates required for execution may cause actual
annual operating results to differ significantly from the 2024 LOM
Plan schedule shown in Table 4. Gatos Silver provides annual
production guidance and quarterly production results for CLG, and
such results can vary quarter over quarter based on short term
execution plans and constraints. The Company cautions investors
that guidance might differ from the 2024 LOM Plan, and actual
results might significantly differ from guidance.
2024 LOM Cash Flows
Table 5 presents a summary of 2024 LOM Plan cash
flows. In the 2024 LOM Plan, silver accounts for 49% of the total
payable metal value, with zinc, lead, gold and copper representing
28%, 17%, 2% and 4%, respectively.
Table 5: Summary of 2024 LOM Plan Free
Cash Flow at Various Silver
Prices(1,2)
(100% LGJV Basis)
|
After-tax Free Cash Flow
($M)(2) |
H22024 |
2025 |
2026 |
2027 |
2028 |
2029 |
2030 |
2031 |
2032 |
2033+ |
LOM |
|
Silver Price $21/oz |
40.7 |
76.5 |
64.0 |
58.2 |
59.4 |
83.8 |
88.5 |
71.7 |
57.8 |
(16.4) |
584.2 |
|
2024 Reserve Prices ($23/oz Ag) |
48.6 |
88.6 |
72.2 |
65.4 |
66.3 |
90.7 |
95.5 |
77.4 |
62.1 |
(16.4) |
650.4 |
|
Silver Price $25/oz |
56.5 |
101.7 |
83.9 |
72.6 |
73.1 |
97.6 |
102.4 |
83.1 |
67.9 |
(16.4) |
722.5 |
|
Silver Price $30/oz |
76.4 |
134.3 |
113.3 |
92.8 |
90.2 |
114.9 |
120.6 |
101.8 |
83.4 |
(16.4) |
911.3 |
|
Silver Price $35/oz |
96.2 |
167.2 |
142.4 |
118.0 |
112.3 |
135.0 |
143.6 |
121.7 |
98.9 |
(16.4) |
1,118.9 |
(1) Prices for zinc, lead, gold
and copper are maintained at 2024 reserve assumptions of $1.25/lb,
$0.95/lb, $1,850/oz and $4.00/lb,
respectively.(2) See Non-GAAP Financial Measures
below.
Figure 7 presents a sensitivity of 2024 LOM Plan
net present value to silver prices.
Figure 7 – Summary of 2024 LOM Plan Net
Present Value at Various Silver
Prices(1) (100%
LGJV Basis)
(1) NPV as of July 1, 2024 at a
5% discount rate. Prices for zinc, lead, gold and copper are
maintained at 2024 reserve assumptions of $1.25/lb, $0.95/lb,
$1,850/oz and $4.00/lb, respectively.
Total sustaining capital costs for the 2024 LOM
Plan at CLG are estimated at $186.9 million. Sustaining capital
costs are summarized in Table 6 below.
Sustaining capital costs include underground
access development to the lower levels in the Central and
North-West Zones, and development of the South-East Deeps zone.
They also include ventilation infrastructure, together with
equipment replacements and other infrastructure projects including
installation of the copper-lead separation circuit, upgrades to the
underground dewatering system as the mine is developed further, and
two additional tailings dam raises anticipated to be completed in
2025 and 2027/2028.
Table 6: 2024 LOM Plan Sustaining
Capital Costs Summary
|
Sustaining Capital Costs |
LOM ($M) |
|
Mine Development |
$96.1 |
|
Infrastructure and Equipment |
$90.8 |
|
Total Sustaining Capital Cost |
$186.9 |
The average 2024 LOM Plan site operating costs
are estimated at $82.14 per tonne milled and are summarized in
Table 7 below. Operating costs have been developed based on recent
actual costs considering the continued ramp-up to 3,500 tpd, the
transition to a higher proportion of LH stoping mining in the plan,
and minor allowances for business improvement initiatives that are
currently being implemented. Operating costs are based on long term
assumptions, including a Mexican Peso exchange rate of MXN 20.00
per US$1.00.
Table 7: 2024 LOM Plan Unit Operating
Costs Summary
|
Unit Operating Costs |
LOM ($/t) |
|
Mining |
$42.16 |
|
Processing |
$24.77 |
|
Mine General and Administrative |
$15.20 |
|
Total Operating Cost |
$82.14 |
All-in sustaining costs are defined in the
Non-GAAP Financial Performance Measures section and summarized in
Table 8 below.
Table 8: 2024 LOM Plan All-In Sustaining
Costs(1)
|
Cash Costs and All-In Sustaining Costs |
Units |
LOM |
|
Cash Costs |
$M |
$1,147.8 |
|
Sustaining Capital |
$M |
$186.9 |
|
All-In Sustaining Costs |
$M |
$1,334.7 |
|
Payable Silver Ounces |
Moz |
45.5 |
|
All-In Sustaining Costs before by-product
credits |
$/oz Ag payable |
$29.33 |
|
By-Product Credits |
$/oz Ag payable |
($24.39) |
|
By-product All-In Sustaining Costs |
$/oz Ag payable |
$4.94 |
|
Payable Silver Equivalent Ounces |
Moz AgEq |
93.8 |
|
Co-product All-In Sustaining Costs |
$/oz AgEq |
$14.24 |
(1) By-product AISC and Co-product AISC exclude the
LGJV management fee and administrative costs of $1.35 / oz Ag
payable and $0.65 / oz AgEq payable, respectively. Refer to Table 9
for AISC details.
Opportunities – Growth, Margin
Improvement and District-Scale Potential
The LGJV is analyzing multiple value enhancement
projects beyond the 2024 LOM Plan and 2024 Mineral Reserve. The CLG
team is focused on continuing to gradually increase mine production
rates by implementing various optimization and improvement
initiatives across the maintenance and mine operation functions.
Capital efficient modifications to the existing plant to increase
throughput rates beyond 3,500 tpd are being evaluated. The LGJV has
completed preliminary metallurgical testwork on potentially
improving silver, zinc and gold recoveries through either ultra
fines recovery or increasing silver and gold recovery through a
pyrite recovery circuit. These processing concepts along with mill
expansion projects will continue to be analyzed over the coming
year in conjunction with targets to increase mineral reserves and
further mine life extension initiatives, with the potential to
increase throughput rates up to 4,000 tpd.
The Los Gatos District (“LGD”) is comprised of a
large land package covering over 103,000 hectares with an
established pipeline of prospects and more than 50 targets
identified to date. Since the database cutoff on March 31, 2024,
drilling at South-East Deeps has shifted back towards resource
extension drilling, testing for the limits of mineralization
potential along strike, down-plunge and shallower within the
overall SE Deeps zone, with drilling results described in our news
release dated July 23, 2024 demonstrating the extension of this
mineralization beyond what formed the basis of the 2024 Updates,
and continuing to highlight additional potential of the system.
Following the March 31, 2024 database cutoff, the focus of
exploration has shifted to explore the broader LGD, including
drilling at the Portigueño, Central Deeps and San Luis targets,
with early results showing mineralization as described in our news
release dated July 23, 2024. Quarterly exploration program updates
will continue with the next one expected in early October.
Esther Mineral Resource Unchanged since
2022
The Esther Mineral Resource was not updated
during 2024 and remains the same as reported in 2022 and 2023.
Updated Technical Reports
The Company expects to file an updated technical report summary
prepared in accordance with subpart 1300 of Regulation S-K (“S-K
1300”) in the United States on the EDGAR section of the Securities
and Exchange Commission (“SEC”) website at www.sec.gov, and file an
updated technical report prepared in accordance with National
Instrument 43-101 - Standards of Disclosure for Mineral Projects
(“NI 43-101”) in Canada under the Company’s profile on SEDAR+ at
www.sedarplus.ca (collectively, the “2024 Technical Reports”), to
support the disclosure regarding the 2024 Updates. The 2024
Technical Reports are expected to be filed within 45 days.
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 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 proposed transaction would consolidate three
world-class, producing silver mining districts in Mexico to create
a leading intermediate primary silver producer. Information
relating to the proposed transaction can be found at the Company’s
website at www.gatossilver.com.
Quality Assurance/Quality
Control
The half core samples from the LGJV’s surface
exploration drillholes are shipped directly in sealed bags to the
ALS Limited (“ALS”) preparation facilities in Chihuahua City,
Mexico. After sample preparation in Chihuahua, sample pulps are
shipped to ALS in North Vancouver, Canada for analysis. The
remaining half core is retained on site. Samples sent for analysis
are sawn half-core NQ or HQ in diameter and normally 2m in length
but varied based on geological contacts. Samples are prepared using
a method whereby the entire sample is crushed, and a subset is
pulverized. Samples are analyzed for base metals and silver using
inductively coupled plasma methods. Gold and overlimit silver are
assayed using fire assay techniques. Sample batches include
intermittent blanks, duplicates, and certified standards. The
results of the assaying of the QA/QC material included in each
batch are tracked to ensure the integrity of the assay data. ALS is
a third-party independent laboratory.
Qualified Person
Scientific and technical disclosure in this
press release regarding the Cerro Los Gatos 2024 Mineral Resource
was based upon information prepared by or under the supervision of
Ronald Turner, MAusIMM(CP), an employee of Golder Associates S.A.
Scientific and technical disclosure in this press release regarding
the 2024 Mineral Reserve, the 2024 LOM Plan and other economic
analyses that will also be set out in the 2024 Technical Reports
was based upon information prepared by or under the supervision of
Stephan Blaho, P.Eng. an employee of WSP Canada Inc. Scientific and
technical disclosure in this press release regarding the
metallurgical assumptions for the 2024 LOM Plan and other economic
analyses that will also be set out in the 2024 Technical Reports
was based upon information prepared by or under the supervision of
Adam Johnston, FAusIMM(CP), Chief Metallurgist with Transmin
Metallurgical Consultants (UK). Other 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. Each of Ronald Turner,
MAusIMM(CP), Stephan Blaho, P.Eng., Adam Johnston, FAusIMM(CP), and
Tony Scott, P.Geo. is a “Qualified Person,” as defined in S-K 1300
and NI 43-101. Ronald Turner, MAusIMM(CP), Stephan Blaho, P.Eng.
and Adam Johnston, FAusIMM(CP) are all independent of Gatos Silver
and the LGJV. Each Qualified Person has verified the data disclosed
herein in respect of the subject matter associated with the
Qualified Person identified above, including sampling, analytical,
and test data underlying the related information or opinions.
Non-GAAP Financial 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 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, and royalties. 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.
Free Cash Flow
Management uses free cash flow (“FCF”) as a
non-GAAP measure to analyze cash flows generated from operations.
As used herein, FCF is cash provided by operating activities less
cash used in investing activities. The Company believes that this
measure assists in evaluating the Company’s ability to generate
cash flow after capital investments. The most directly comparable
measure prepared in accordance with GAAP is cash provided by
operating activities. The Company believes FCF is also useful as
one of the bases for comparing the Company’s performance with its
competitors. Although FCF and similar measures are frequently used
as measures of cash flows generated from operations by other
companies, the Company’s calculation of FCF is not necessarily
comparable to such other similarly titled captions of other
companies. The Company is unable to provide without unreasonable
efforts a reconciliation of forward-looking free cash flow on a
per-year basis to cash flow provided by operating activities due to
the inherent difficulty in forecasting and quantifying certain
amounts, some of which may be material, that are necessary for such
reconciliation.
Reconciliation of GAAP to non-GAAP
measures
Table 9 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 the Company’s operations.
Table 9: Reconciliation of Cash Costs
and AISC to Cost of Sales (as defined under US
GAAP)(1,2,3,4,5)
|
Cash Costs and All-In Sustaining Costs |
Units |
2024 LOM Plan(H2’24+) |
2023 LOM Plan(H2’24+) |
|
Mining Costs |
$M |
$435.6 |
$305.3 |
|
Milling Costs |
$M |
$256.0 |
$185.6 |
|
Transportation Costs |
$M |
$148.7 |
$99.9 |
|
Cost of Sales |
$M |
$840.2 |
$590.8 |
|
Royalties |
$M |
$5.0 |
$2.6 |
|
General and Administrative |
$M |
$157.1 |
$123.7 |
|
Expenses |
$M |
$1,002.3 |
$717.1 |
|
Treatment and Refining Costs |
$M |
$145.5 |
$125.0 |
|
Cash Costs |
$M |
$1,147.8 |
$842.1 |
|
Sustaining Capital |
$M |
$186.9 |
$114.7 |
|
Accretion Expense |
$M |
$0.0 |
$0.0 |
|
All-in Sustaining Costs
(AISC)(1)(2) |
$M |
$1,334.7 |
$956.9 |
|
By-product Credits(3) |
$M |
($1,109.9) |
($729.1) |
|
Payable Silver |
Moz |
45.5 |
37.4 |
|
Cash Costs before By-product Credits |
$/oz Ag payable |
$25.23 |
$22.52 |
|
AISC before By-product Credits |
$/oz Ag payable |
$29.33 |
$25.59 |
|
By-product Credits(3) |
$/oz Ag payable |
($24.39) |
($19.50) |
|
Cash Costs, net of by-product credits |
$/oz Ag payable |
$0.83 |
$3.02 |
|
By-product
AISC(1) |
$/oz Ag payable |
$4.94 |
$6.09 |
|
Payable Silver Equivalent(3)(4) |
Moz |
93.8 |
70.5 |
|
Co-product Cash Cost |
$/oz AgEq payable |
$12.24 |
$11.94 |
|
Co-product
AISC(1) |
$/oz AgEq payable |
$14.24 |
$13.57 |
|
Management Fee and Admin. Costs |
$M |
$61.2 |
$42.3 |
|
By-product
AISC(5) |
$/oz Ag Payable |
$6.29 |
$7.22 |
|
Co-product
AISC(5) |
$/oz Ag Eq. Payable |
$14.89 |
$14.17 |
(1) Excludes LGJV management fee and administration
costs of approximately $7 million per year, equivalent to $1.35 /
oz Ag payable and $0.65 / oz AgEq payable, respectively in the 2024
LOM Plan and $1.13 / oz Ag payable and $0.60 / oz AgEq payable,
respectively in the 2023 LOM Plan. (2) Excludes
any exploration costs related to future resource expansion and
conversion.(3) Uses 2024 reserve price assumptions of
$23.00/oz silver, $1.25/lb zinc, and $0.95/lb lead, $1,850/oz gold
and $4.00/lb copper for the 2024 LOM Plan. Uses 2023 reserve price
assumptions of $22.00/oz silver, $1.20/lb zinc, and $0.90/lb lead,
$1,700/oz gold and $3.50/lb copper for the 2023 LOM Plan.(4)
Payable silver equivalent ounces include payable copper
aligned to current payable terms for copper in lead concentrate and
expected payable terms for copper concentrates.(5)
Includes LGJV management fee and administration costs of
approximately $7 million per year in the 2024 LOM Plan and $6
million per year in the 2023 LOM Plan
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 production including
potential production increases, cash flows, CLG’s life of mine and
mine life extensions, mining rates and mill throughput rates,
growth potential and margin improvement opportunities, mineral
resource and reserve estimates, future prices for silver, zinc,
lead, gold and copper, potential cash distributions to LGJV
partners, NPV, projected capital, operating costs, sustaining and
all-in sustaining costs, the exchange rate for the Mexican Peso to
the U.S. Dollar, mine design, mine scheduling and mining methods
including the proportion of LH stoping and filling methodologies,
mining dilution and recovery estimates, timing of filing of updated
2024 Technical Reports, viability of potential modifications and
projects to improve efficiency, timing of proposed drilling,
potential results from exploration including possible increases to
the LOM, and the timing of exploration updates are forward-looking
statements. Forward-looking statements are based on management’s
beliefs, assumptions, current expectations about future events 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, operating conditions, and including other
assumptions set out herein and to be set out in the 2024 Technical
Reports. Such statements are subject to risks, uncertainties, and
other factors that could cause actual results to 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. Further, although the Company has
attempted to identify factors that could cause actual actions,
events or results to differ materially from those described in
forward-looking statements, there may be other factors that cause
actions, events or results not to be as anticipated, estimated or
intended. 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,
and as such, readers should not place undue reliance on
forward-looking statements. 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
__________________
1 Includes LGJV management fee and administrative costs. Refer
to Table 9 for AISC details. 2 See Non-GAAP Financial Measures
below. 3 NPV is as of July 1, 2024 using a 5% discount rate. 2024
NPV and free cash flow assume reserve price assumptions of $23/oz
silver, $1.25/lb zinc, $0.95/lb lead, $1,850/oz gold, $4.00/lb
copper and a Mexican Peso exchange rate of MXN 20.00 per US$1.00.
2023 NPV used prices of $22/oz silver, $1.20/lb zinc, $0.90/lb
lead, $1,700/oz gold, $3.50/lb copper and a Mexican Peso exchange
rate of MXN 20.00 per US$1.00. 4 As of 16:00 Pacific time on
September 24, 20245 NPV and free cash flow sensitivities presented
here consider $30/oz Ag and $35/oz Ag, with other prices reflecting
the 2024 reserve price assumptions described above. NPV is as of
July 1, 2024 using a 5% discount rate. 6 Silver equivalent
production for the 2024 LOM Plan is calculated using 2024 reserve
price assumptions to “convert” zinc, lead, gold and copper
production contained in concentrates to “equivalent” silver ounces
(contained metal, multiplied by price, divided by silver price). 7
2024 Mineral Reserve and Mineral Resource figures as at July 1,
2024; 2023 Mineral Reserve and Mineral Resource figures as at July
1, 2023
Figures accompanying this announcement are available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/05e3189f-3c45-4b8f-8a91-3531e1000019https://www.globenewswire.com/NewsRoom/AttachmentNg/282b7682-e2fc-425d-a39c-b33a7f4789c1https://www.globenewswire.com/NewsRoom/AttachmentNg/48b9b9b0-3774-404d-a89d-d43d4edace4fhttps://www.globenewswire.com/NewsRoom/AttachmentNg/7a0f44d9-6f10-4ecd-82b6-fe52c9d49447https://www.globenewswire.com/NewsRoom/AttachmentNg/75c7ad31-de0f-4c73-93a7-247d4ea8f03fhttps://www.globenewswire.com/NewsRoom/AttachmentNg/db4dbc68-675b-4f3b-8a08-3896dc418961https://www.globenewswire.com/NewsRoom/AttachmentNg/9d2fcfab-ecca-4cb3-ba37-24587d44655a
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