Gatos Silver Reports Second Quarter 2024 Results
TSX - Toronto Stock Exchange · Copper · Molybdenum · Silver · Gold · Zinc · Lead · Germanium · Indium · Sulfur · Nickel · Platinum · Palladium
VANCOUVER, British Columbia, Aug. 06, 2024 (GLOBE NEWSWIRE) -- Gatos Silver, Inc. (NYSE/TSX: GATO) (“Gatos Silver” or the “Company”) today announced its second quarter 2024 financial and operating results. The Company will host an investor and analyst call on August 7, 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. Production for the second quarter of 2024 was previously disclosed on July 9, 2024. The Company’s reporting currency is US dollars.
Dale Andres, CEO of Gatos Silver, commented: “The LGJV generated record revenue and free cash flow in quarter, reflecting significantly lower unit operating costs and higher metal prices combined with the strong previously reported production at CLG. The LGJV has distributed $95 million to its partners so far this year through July, with our share being $66.5 million.
“We remain on track to achieve 2024 production and cost guidance and we continue to expect that our updated life of mine plan scheduled for the third quarter of 2024 will further extend CLG’s mine life. We are also continuing to follow-up on the exciting initial exploration results we announced on July 23, as we continue to advance our district exploration program.”
Summary
LGJV Q2 2024 results compared to Q2 2023 (100% basis):
Record revenue of $94.2 million, up 62% from $58.3 million Cost of sales $32.0 million, up 24% from $25.8 million Record net income $20.5 million, up from $0.7 million Record EBITDA $54.1 million 1 , up 101% from $27.0 million Record cash flow from operations of $54.5 million, up 59% from $34.3 million Record free cash flow $40.8 million 1 , up 107% from $19.7 million Silver production 2.30 million ounces, up 15% from 2.00 million ounces Silver equivalent production of 3.88 million ounces 2 , up 18% from 3.30 million ounces By-product AISC of $6.57 1 per ounce of payable silver, down 54% from $14.32 Co-product AISC of $15.26 1 per ounce of payable silver, down 13% from $17.55
Gatos Silver Q2 2024 results compared to Q2 2023:
Net income of $9.2 million, up from net loss of $3.6 million Basic and diluted earnings per share of $0.13, up from loss of $0.05 EBITDA of $8.2 million 1 , up from a $3.5 million loss Cash flow provided by operating activities and free cash flow of $11.8 million 1 , compared to cash flow used by operating activities and free cash outflow of $3.8 million 1
_ 1 See “Non-GAAP Financial Measures” below. 2 See definition of silver equivalent production below
At the LGJV, the 62% increase in revenue in Q2 2024, compared to the same quarter in 2023, was primarily attributable to higher sales volumes and higher realized metal prices after final settlement adjustments. Cost of sales increased by 24% primarily due to a 29% increase in concentrate sales volumes and the associated increase in mining and milling rates. Site operating unit costs of $101.28/t milled were 3% lower than in Q2 2023. By-product AISC 1 per ounce of payable silver decreased to $6.57 primarily due to significantly higher by-product production and sales volumes, further supported by lower sustaining capital 1 expenditures during the quarter.
For Gatos Silver, higher net income, earnings per share and EBITDA 1 for Q2 2024 were primarily attributable to the higher equity income from the LGJV. This was partially offset by an increase in general and administrative expenses, mainly due to higher non-cash stock-based compensation expenses of $1.6 million and higher legal and consulting expenses which are not expected to be recurring beyond 2024.
As of June 30, 2024, the Company had a cash balance of $82.5 million, up 17% from $70.6 million at the end of March 2024. The increase in cash was due to receipt of a $17.5 million capital distribution during the second quarter. On July 29, 2024, which was subsequent to the quarter end, the LGJV made a capital distribution to its partners of $40.0 million of which the Company received $28.0 million. As of July 31, 2024, the Company had a cash balance of $108.9 million and the LGJV had a cash balance of $24.4 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 six months ended June 30, 2024 and 2023. For a detailed discussion of financial and operating results refer to the Form 10-Q for the three months ended June 30, 2024, filed on August 6, 2024 on both the EDGAR and SEDAR+ systems and posted on the Company’s website at https://gatossilver.com.
Los Gatos Joint Venture
| LGJV 100% Basis Selected Financial Information (Unaudited) | Three Months Ended June 30, | Six Months Ended June 30, | | | | | | | | | | | | (in millions, except where otherwise stated) | | 2024 | | | 2023 | | | 2024 | | | 2023 | | | Revenue | $ | 94.2 | | $ | 58.3 | | $ | 166.4 | | $ | 128.1 | | | Cost of sales | | 32.0 | | | 25.8 | | | 62.7 | | | 51.8 | | | Royalties and duties | | 0.7 | | | 0.3 | | | 1.0 | | | 0.7 | | | Exploration | | 1.6 | | | 0.7 | | | 3.0 | | | 1.1 | | | General and administrative | | 4.1 | | | 4.4 | | | 8.4 | | | 8.3 | | | Depreciation, depletion and amortization | | 20.8 | | | 22.0 | | | 41.1 | | | 42.8 | | | Other expense (income) | | 2.0 | | | (0.4 | ) | | 2.2 | | | (0.9 | ) | | Income tax expense | | 12.5 | | | 4.7 | | | 17.3 | | | 10.7 | | | Net income and comprehensive income 2 | $ | 20.5 | | $ | 0.7 | | $ | 30.7 | | $ | 13.4 | | | Sustaining capital 1 | $ | 11.4 | | $ | 13.1 | | $ | 20.3 | | $ | 20.7 | | | Resource development drilling expenditures 1 | $ | 1.9 | | $ | 4.0 | | $ | 5.1 | | $ | 7.0 | | | EBITDA 1 | $ | 54.1 | | $ | 27.0 | | $ | 89.3 | | $ | 66.6 | | | Cash provided by operating activities | $ | 54.5 | | $ | 34.3 | | $ | 91.8 | | $ | 74.4 | | | Free cash flow 1 | $ | 40.8 | | $ | 19.7 | | $ | 66.3 | | $ | 48.4 | | | | | | | | | | | | | | | | | Operating Results (CLG 100% Basis) | | | | | | | | | | | | | | Tonnes milled (dmt) | | 294,869 | | | 265,342 | | | 586,983 | | | 525,770 | | | Tonnes milled per day (dmt) | | 3,240 | | | 2,916 | | | 3,225 | | | 2,905 | | | Average Grades | | | | | | | | | | | | | | Silver grade (g/t) | | 273 | | | 265 | | | 279 | | | 296 | | | Zinc grade (%) | | 4.55 | | | 4.00 | | | 4.27 | | | 3.96 | | | Lead grade (%) | | 2.06 | | | 1.85 | | | 1.92 | | | 1.86 | | | Gold grade (g/t) | | 0.29 | | | 0.26 | | | 0.29 | | | 0.28 | | | Production - Contained Metal | | | | | | | | | | | | | | Silver ounces (millions) | | 2.30 | | | 2.00 | | | 4.67 | | | 4.43 | | | Zinc pounds – in zinc conc. (millions) | | 19.1 | | | 14.8 | | | 34.9 | | | 28.9 | | | Lead pounds – in lead conc. (millions) | | 12.0 | | | 9.7 | | | 22.2 | | | 19.1 | | | Gold ounces – in lead conc. (thousands) | | 1.36 | | | 1.20 | | | 2.75 | | | 2.58 | | | Silver equivalent ounces (millions) 2 | | 3.88 | | | 3.30 | | | 7.58 | | | 6.99 | | | Co-product cash cost per ounce of payable silver equivalent 1 | $ | 11.83 | | $ | 12.72 | | $ | 11.70 | | $ | 11.49 | | | By-product cash cost per ounce of payable silver 1 | $ | 0.96 | | $ | 7.10 | | $ | 3.66 | | $ | 4.66 | | | Co-product AISC per ounce of payable silver equivalent 1 | $ | 15.26 | | $ | 17.55 | | $ | 14.73 | | $ | 14.94 | | | By-product AISC per ounce of payable silver 1 | $ | 6.57 | | $ | 14.32 | | $ | 8.42 | | $ | 9.80 | | | | | | | | | | | | | | | | | Sales volumes by payable metal | | | | | | | | | | | | | | Silver ounces (millions) | | 2.03 | | | 1.81 | | | 4.27 | | | 4.03 | | | Zinc pounds – in zinc conc. (millions) | | 15.9 | | | 11.7 | | | 29.6 | | | 23.7 | | | Lead pounds – in lead conc. (millions) | | 11.0 | | | 9.0 | | | 21.0 | | | 17.9 | | | Gold ounces – in lead conc. (thousands) | | 0.97 | | | 0.93 | | | 2.15 | | | 2.06 | | | Copper pounds – in lead conc. (millions) | | 0.03 | | | — | | | 0.10 | | | — | | | | | | | | | | | | | | | | | Average realized price by payable metal | | | | | | | | | | | | | | Average realized price per silver ounce 4 | $ | 29.00 | | $ | 24.11 | | $ | 25.80 | | $ | 25.48 | | | Average realized price per zinc pound 4 | $ | 1.53 | | $ | 0.99 | | $ | 1.32 | | $ | 1.21 | | | Average realized price per lead pound 4 | $ | 0.96 | | $ | 0.92 | | $ | 0.91 | | $ | 0.99 | | | Average realized price per gold ounce 4 | $ | 2,200 | | $ | 1,817 | | $ | 2,057 | | $ | 1,801 | | | Average realized price per copper pound 4 | $ | 3.74 | | $ | — | | $ | 3.83 | | $ | — | |
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 six months ended June, 2023 would be 3.24 million ounces and 6.89 million ounces, respectively, using price assumptions for 2024. 4 Realized prices include the impact of final settlement adjustments from sales
Gatos Silver, Inc.
| Selected Financial Information (Unaudited) | Three Months Ended June 30, | Six Months Ended June 30, | | | | | | | | | | | | (in millions, except where otherwise stated) | | 2024 | | | 2023 | | | 2024 | | | 2023 | | | General and Administrative | $ | 7.9 | | $ | 6.1 | | $ | 14.8 | | $ | 11.7 | | | Total expenses | | 7.9 | | | 6.1 | | | 14.9 | | | 11.8 | | | Equity income in affiliates | | 14.5 | | | 1.5 | | | 21.8 | | | 6.5 | | | Other income, net | | 2.7 | | | 1.1 | | | 5.0 | | | 2.5 | | | Total net other income | | 17.2 | | | 2.6 | | | 26.8 | | | 9.0 | | | Net income (loss) and comprehensive income (loss) 2 | $ | 9.2 | | $ | (3.6 | ) | $ | 11.7 | | $ | (2.8 | ) | | Net income (loss) and comprehensive income (loss) per share (basic and diluted) | $ | 0.13 | | $ | (0.05 | ) | $ | 0.17 | | $ | (0.04 | ) | | | | | | | | | | | | | | | | EBITDA 1 | $ | 8.2 | | $ | (3.5 | ) | $ | 10.0 | | $ | (2.6 | ) | | Cash provided (used) by operating activities | $ | 11.8 | | $ | (3.8 | ) | $ | 26.9 | | $ | (7.9 | ) | | Free cash flow 1 | $ | 11.8 | | $ | (3.8 | ) | $ | 26.9 | | $ | (7.9 | ) |
1 See Non-GAAP Financial Measures below 2 Totals may not add up due to rounding
2024 Guidance (CLG 100% basis)
Gatos Silver continues to expect plant throughput in 2024 to average in the top half of our previously announced guidance range of 3,000 and 3,300 tonnes processed per day and compares to 2,935 tonnes per day in 2023. Mine debottlenecking efforts are continuing to help achieve our medium-term target of sustaining 3,500 tonnes per day beyond 2024, or 40% above original design capacity.
We continue to expect both silver equivalent and silver production to be in the top half of our previously announced guidance ranges of 13.5 to 15.0 million ounces and 8.4 to 9.2 million ounces respectively for the full year in 2024, and full year co-product and by-product AISCs to remain in the lower half of our original guidance ranges of $14.00 to $16.00 per ounce of payable silver equivalent and $9.50 to $11.50 per ounce of payable silver.
Financial Results Webcast and Conference Call
Investors and analysts are invited to attend the financial results webcast and conference call as follows:
Date: Wednesday, August 7, 2024
Time: 11:00 a.m. ET
Listen-Only Webcast: https://events.q4inc.com/attendee/924567096
Direct Event Registration Link (for Analysts only): https://registrations.events/direct/Q4I98433134
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.
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.
EBITDA
Management uses earnings before interest, income tax, depreciation, depletion and amortization (“EBITDA”) to evaluate the Company’s operating performance, to plan and forecast its operations, and assess leverage levels and liquidity measures. The Company believes the use of EBITDA reflects the underlying operating performance of our core mining business and allows investors and analysts to compare results of the Company to similar results of other mining companies. EBITDA do not represent, and should not be considered an alternative to, net income (loss) or cash flow from operations as determined under GAAP.
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 (used in) investing activities, as presented on the condensed 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 June 30, | Six Months Ended June 30, | | | | | | | | | | | | (in thousands, except where otherwise stated) | | 2024 | | | 2023 | | | 2024 | | | 2023 | | | Expenses | $ | 59,180 | | $ | 53,215 | | $ | 116,193 | | $ | 104,839 | | | Depreciation, depletion and amortization | | (20,821 | ) | | (22,027 | ) | | (41,077 | ) | | (42,846 | ) | | Exploration 1 | | (1,601 | ) | | (657 | ) | | (2,972 | ) | | (1,120 | ) | | Treatment and refining costs 2 | | 2,339 | | | 3,917 | | | 6,296 | | | 8,072 | | | Cash costs (A) | $ | 39,097 | | $ | 34,448 | | $ | 78,440 | | $ | 68,945 | | | Sustaining capital 3 | | 11,357 | | | 13,100 | | | 20,301 | | | 20,742 | | | Co-product AISC (B) | $ | 50,454 | | $ | 47,548 | | $ | 98,741 | | $ | 89,687 | | | By-product credits 4 | | (37,144 | ) | | (21,574 | ) | | (62,818 | ) | | (50,161 | ) | | AISC, net of by-product credits (C) | $ | 13,310 | | $ | 25,974 | | $ | 35,923 | | $ | 39,526 | | | Cash costs, net of by-product credits (D) | $ | 1,953 | | $ | 12,874 | | $ | 15,622 | | $ | 18,784 | | | | | | | | | | | | | | | | | Payable ounces of silver equivalent 5 (E) | | 3,306 | | | 2,709 | | | 6,703 | | | 6,002 | | | Co-product cash cost per ounce of payable silver equivalent (A/E) | $ | 11.83 | | $ | 12.72 | | $ | 11.70 | | $ | 11.49 | | | Co-product AISC per ounce of payable silver equivalent (B/E) | $ | 15.26 | | $ | 17.55 | | $ | 14.73 | | $ | 14.94 | | | | | | | | | | | | | | | | | Payable ounces of silver (F) | | 2,025 | | | 1,814 | | | 4,268 | | | 4,033 | | | By-product cash cost per ounce of payable silver (D/F) | $ | 0.96 | | $ | 7.10 | | $ | 3.66 | | $ | 4.66 | | | By-product AISC per ounce of payable silver (C/F) | $ | 6.57 | | $ | 14.32 | | $ | 8.42 | | $ | 9.80 | |
1 Exploration costs are not related to current mining operations. 2 Represent reductions on customer invoices and are included in revenue of the LGJV combined statement of operations and comprehensive income. 3 Sustaining capital excludes resource development drilling costs related to resource development drilling of the South- East Deeps zone. 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. 5 Silver equivalents utilize the average realized prices during the six months ended June 30, 2024, of $25.80/oz silver, $1.32/lb zinc, $0.91/lb lead, $2,057/oz gold and $3.83/lb copper and the average realized prices during the three months ended June 30, 2024, of $29.00/oz silver, $1.53/lb zinc, $0.96/lb lead and $2,200/oz gold and $3.74/lb copper. Silver equivalents utilize the average realized prices during the six months ended June 30, 2023, of $25.48/oz silver, $1.21/lb zinc, $0.99/lb lead and $1,801/oz gold and the average realized prices during the three months ended June 30, 2023, of $24.11/oz silver, $0.99/lb zinc, $0.92/lb lead and $1,817/oz gold. The average realized prices are determined based on revenue inclusive of final settlements.