Gatos Silver Provides Updated Cerro Los Gatos Mineral Reserve, Mineral Resource, and Life of Mine Plan
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Mine Life Extended to the End of 2032 with 36% Increase in Total Silver Equivalent Production Strong Free Cash Flows Throughout the Updated Life of Mine Numerous Opportunities Available for Further Growth, Mine Life Extension and Margin Improvement
VANCOUVER, British Columbia, Sept. 25, 2024 (GLOBE NEWSWIRE) -- 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 AISC 1,2 of $14.89 per ounce of payable silver equivalent
Average annual after-tax free cash flow 2 , 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 flow 2 ,5 of $111 million, resulting in an after-tax NPV 5 of $760 million, at a silver price of $30/oz Average annual after-tax free cash flow 2 ,5 of $136 million, resulting in an after-tax NPV 5 of $935 million, at a silver price of $35/oz
Total silver equivalent production 6 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 earlier 7 . 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 earlier 7 , 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.