EX-99.1 2 dp207129_ex9901.htm EXHIBIT 99.1

 

Exhibit 99.1

 

925 W Georgia St, Suite 910

Vancouver, British Columbia V6C 3L2

(604) 424-0984

www.gatossilver.com

 

GATOS SILVER REPORTS FOURTH QUARTER AND FULL YEAR 2023 RESULTS AND PROVIDES 2024 GUIDANCE

 

Vancouver, BC — February 20, 2024 — Gatos Silver, Inc. (NYSE/TSX: GATO) (“Gatos Silver” or the “Company”) today announced its fourth quarter and full year 2023 financial and operating results. The Company will host an investor and analyst call on February 21, 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 fourth quarter of 2023 was previously disclosed on January 9, 2024. The Company’s reporting currency is US dollars.

 

Dale Andres, CEO said: “During the fourth quarter we continued to add cash to the balance sheet, generated from another quarter of strong operational performance at the LGJV. All-in sustaining cost (“AISC”) per silver ounce was at the lower end of 2023 guidance thanks to improved operating efficiencies, which helped to offset inflationary cost pressures and the impact of the stronger Mexican peso.”

 

“For 2024, we expect silver production of 8.4 million ounces to 9.2 million ounces at an AISC, after by-product credits, of $9.50 to $11.50 per payable ounce produced. On a quarterly basis, we expect production will gradually increase throughout the year as we debottleneck the mine and further optimize the mill at CLG. Conversion drilling of the South-East Deeps inferred resource to extend mine life is progressing well and the LGJV has started ramping up exploration efforts on near mine targets in the Los Gatos district.”

 

Summary

 

LGJV 2023 results (100% basis):

 

CLG life of mine extended by 2.75 years to the end of 2030 with a 46% increase in total silver production

 

Cost of sales only 4% higher than 2022, despite mining and processing 10% more tonnes year over year

 

Cash from operating activities of $142.0 million and free cash flow of $84.9 million1

 

AISC after by-product credits of $11.331 per payable silver ounce produced on our previously disclosed production of 9.2 million ounces

 

Gatos Silver 2023 results:

 

Net income of $12.9 million or $0.19 per basic and $0.18 per diluted share

 

Received capital distribution of $59.5 million from the LGJV

 

Cash used by operating activities of $12.0 million and free cash flow of $47.5 million1

 

Year-end cash balance of $55.5 million and no debt

 

LGJV Q4 2023 results compared to Q4 2022 (100% basis):

 

Revenue of $73.5 million, down 21% from $93.0 million

 

Cost of sales $28.0 million, up 10% from $25.5 million

 

Net income $24.9 million, down 16% from $29.8 million

 

EBITDA $38.6 million, down 38% from $61.9 million1

 

Cash from operating activities of $38.2 million, down 2% from $39.1 million

 

Sustaining capital $11.7 million, down 40% from $19.5 million1

 

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Free cash flow $22.3 million, up 19% from $18.7 million1

 

Co-product AISC of $14.73 per ounce of payable silver, down 0.5% from $14.801

 

By-product AISC of $11.12 per ounce of payable silver, down 8% from $12.131

 

Gatos Silver Q4 2023 results compared to Q4 2022:

 

Net income of $12.3 million, up 160% from $4.7 million

 

Basic and diluted earnings per share of $0.18, up 157% from $0.07

 

EBITDA $11.8 million, up 116% from $5.5 million1

 

Cash used in operating activities of $2.5 million, compared to cash provided by operations of $5.9 million

 

Free cash flow $22.0 million, up 277% from $5.8 million1

 

1See “Non-GAAP Financial Measures” below

 

For Gatos Silver, higher net income, earnings per share and EBITDA1 for Q4 2023 were primarily attributable to a decrease in general and administrative expenses and lower legal settlement expenses. The change in operating cash flow was primarily attributable to the dividend payment received in Q4 2022. The increase in free cash flow1 was a result of the capital distribution received in Q4 2023.

 

Cash distributions to the LGJV partners in 2023 have been made through capital distributions which is more tax efficient than distributing cash dividends. As a result, cash distributions are currently shown on the balance sheet as cash flow received from investing activities, as opposed to being included as cash flows from operating activities as in 2022 when dividends were paid by the LGJV.

 

As of December 31, 2023, the Company had a cash balance of $55.5 million, up 226% from $17.0 million a year earlier. The increase in cash was primarily due to receipt of $59.5 million in capital distributions and a $6.0 million management fee from the LGJV, partly offset by general and administrative costs incurred in the year.

 

As of January 31, 2023, the Company had a cash balance of $53.1 million and the LGJV had a cash balance of $43.1 million. On February 15, 2024, the LGJV made a capital distribution to its partners of $30.0 million of which the Company received $21.0 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 months and years ended December 31, 2023 and 2022. For a detailed discussion of the year ended December 31, 2023 financial and operating results refer to the Form 10-K for the year ended December 31, 2023, filed on February 20, 2024, on both the EDGAR and SEDAR+ systems and posted on the Company’s website at https://gatossilver.com.

 

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Los Gatos Joint Venture

 

LGJV 100% Basis

Selected Financial Information (Unaudited)

Three Months Ended

December 31,

 

Year Ended

December 31,

(in millions, except where otherwise stated) 2023   2022   2023   2022
Revenue $73.5   $93.0   $268.7   $311.7
   Cost of sales $28.0   $25.5   $111.3   $107.1
   Royalties $0.3   $0.3   $1.4   $3.1
   Exploration $0.8   $3.6   $2.9   $9.8
   General and administrative $5.4   $4.5   $18.1   $14.3
   Depreciation, depletion and amortization $15.6   $17.0   $75.1   $69.4
Other (income) expense $0.2   ($2.6)   ($1.6)   ($1.4)
Income tax expense ($1.7)   $14.8   $8.1   $37.3
Net income $24.9   $29.8   $53.4   $72.2
               
Sustaining capital1 $11.7   $19.5   $41.6   $76.5
Resource development drilling expenditures1 $3.0   $—   $13.5   $—
EBITDA1 $38.6   $61.9   $135.8   $179.5
Cash provided by operating activities $38.2   $39.1   $142.0   $157.4
Free cash flow1 $22.3   $18.7   $84.9   $75.1
               
Operating Results (CLG 100% Basis)              
Tonnes milled (dmt) 277,318   261,929   1,071,400   971,595
Tonnes milled per day (dmt) 3,014   2,847   2,935   2,662
Average Grades              
     Silver grade (g/t) 318   387   299   368
     Zinc grade (%) 3.86   3.74   3.90   4.37
     Lead grade (%) 1.86   1.95   1.85   2.31
     Gold grade (g/t) 0.30   0.30   0.29   0.33
Production - Contained Metal              
     Silver ounces (millions) 2.6   2.9   9.2   10.3
     Zinc pounds – in zinc conc. (millions) 14.6   13.5   57.3   60.7
     Lead pounds – in lead conc. (millions) 10.2   9.7   38.9   43.9
     Gold ounces – in lead conc. (thousands) 1.4   1.3   5.3   5.3
     Silver equivalent ounces (millions)2 3.9   4.2   14.3   15.8
Co-product cash cost per ounce of payable silver equivalent1 $11.26   $9.61   $12.11   $9.41
By-product cash cost per ounce of payable silver1 $6.02   $4.83   $6.31   $2.17
Co-product AISC per ounce of payable silver equivalent1 $14.73   $14.80   $15.51   $14.33
By-product AISC per ounce of payable silver1 $11.12   $12.13   $11.33   $10.24

 

1 See Non-GAAP Financial Measures below

2 Totals may not add up due to rounding

3 Silver equivalent production for both 2022 and 2023 is calculated using prices of $22/oz silver, $1.20/lb zinc, $0.90/lb lead and $1,700/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).

 

Gatos Silver, Inc.

 

Selected Financial Information (Unaudited)

Three Months Ended

December 31,

 

Year Ended

December 31,

(in millions, except where otherwise stated) 2023   2022   2023   2022
Exploration $ —   $ —   $ —   $ 0.1
General and Administrative 6.5   8.5   25.7   25.5
Amortization     0.1   0.2
Total expenses 6.5   8.5   25.8   25.8
Equity income in affiliates 17.7   20.7   33.6   45.2
Other income, net 1.3   (6.7)   5.1   (3.4)
Total net other income 19.0   14.0   38.8   41.9
Income tax expense 0.1   0.7   0.1   1.6
Net income $12.3   $4.7   $12.9   $14.5
Net income per share basic $0.18   $0.07   $0.19       $0.21
Net income per share diluted $0.18   $0.07   $0.18   $0.21
               
EBITDA1 $11.8   $5.5   $12.4   $16.6
Cash (used) provided by operating activities ($2.5)   $5.9   ($12.0)   $14.6
Free cash flow1 $22.0   $5.8   $47.5   $14.5

 

1 See Non-GAAP Financial Measures below

2 Totals may not add up due to rounding

 

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2024 Guidance (CLG 100% basis)

 

Production and cost guidance for 2024 is shown in the table below:

 

CLG 2024 Full Year Guidance (100% Basis)
Production guidance - Contained Metal  
      Silver ounces (millions) 8.4 – 9.2
      Zinc pounds - in zinc conc. (millions) 61 – 69
      Lead pounds - in zinc conc. (millions) 40 – 46
      Gold ounces - in zinc conc. (thousands) 4.5 – 5.5
      Silver Equivalent ("AgEq") ounces - (millions)1 13.5 – 15.0
All-in Sustaining Cost (AISC)2  
       By-product basis ($/oz Ag payable) $9.50 – $11.50
       Co-product basis ($/oz AgEq payable) $14.00 – $16.00

 

1 Silver equivalent production 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 2022 and 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 in the table above at these price assumptions would be 13.7 – 15.3 million ounces.

 

2 Financial metrics assume an exchange rate of 18.50 Mexican Pesos per US$1.00. In 2022 and 2023, an exchange rate of 20.00 Mexican Pesos per US$1.00 was assumed. Costs used in calculating financial metrics include an allocation for Gatos Silver and Dowa corporate costs paid by the Los Gatos Joint Venture (“LGJV”) of approximately $7 million per year. See “Non-GAAP Financial Performance Measures” for additional information.

 

Gatos Silver expects plant throughput to average between 3,000 and 3,300 tonnes processed per day in 2024, compared to 2,935 tonnes per day in 2023. Feed grades to the mill are expected to be lower in the first quarter versus the average grades expected during the year. Following previously disclosed mill throughput tests conducted in December 2023 demonstrating higher capacity with good metallurgical performance, the LGJV plans to continue to strive to achieve sustainably higher plant throughput rates as mine debottlenecking efforts continue with a medium-term target to sustain 3,500 tonnes per day beyond 2024, or 40% above original design capacity.

 

The Company expects sustaining capital expenditures at CLG (100% basis) to be approximately $45 million in 2024, of which $25 million is for underground development primarily to access the lower levels of the NW and Central zones and to further develop access to the SE zone. The remainder of capital expenditures are expected to be primarily associated with minor upgrades to the processing plant, equipment replacements and rebuilds, and dewatering and other

 

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infrastructure work including projects to help improve operating efficiencies and to support debottlenecking efforts in the mine.

 

Exploration and definition drilling expenditures are expected to be approximately $18 million in 2024, of which $9 million is expected to be capitalized and incurred on resource development drilling primarily in the South East Deeps zone and $9 million expensed and incurred on greenfield exploration. The LGJV currently has eight active drill rigs on surface and four underground. The primary focus until the end of the first quarter of 2024 is infilling the South East Deeps zone to approximately 50 metre spacing for the 2024 mineral resource and mineral reserve update anticipated to be announced in the third quarter of 2024. After the end of the first quarter, the focus for the surface drilling rigs is expected to shift to other district targets including Portigueño, San Luis and El Lince.

 

Financial Results Webcast and Conference Call

 

Investors and analysts are invited to attend the financial results webcast and conference call as follows:

 

Date: Wednesday, February 21, 2024

Time: 11:00 a.m. ET

Listen-Only Webcast: https://events.q4inc.com/attendee/541149212

Direct Event Registration Link (for Analysts only): https://registrations.events/direct/Q4I90079276

Dial-in number: 1 888 500 3691 or +1 646 307 1951 Conference ID: 90079

 

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

 

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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 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 Investing Activities as presented on the 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

December 31,

 

Year Ended

December 31,

(in thousands, except where otherwise stated) 2023   2022   2023   2022
Expenses $50,034   $50,921   $208,682   $203,631
Depreciation, depletion and amortization (15,552)   (17,040)   (75,110)   (69,380)
Exploration1 (757)   (3,565)   (2,875)   (9,800)
Treatment and refining costs2 4,309   5,797   17,174   21,871
Cash costs $38,034   $36,113   $147,871   $146,322
Sustaining capital3 11,701   19,490   41,571   76,526
Co-product all-in sustaining costs $49,735   $55,603   $189,442   $222,848
By-product credits4 (24,241)   (23,243)   (95,648)   (125,782)
All-in sustaining costs, net of by-product credits $25,494   $32,360   $93,794   $97,066
Cash costs, net of by-product credits $13,793   $12,870   $52,223   $20,540
               
Payable ounces of silver equivalent5 3,377   3,756   12,214   15,552
Co-product cash cost per ounce of payable silver equivalent $11.26   $9.61   $12.11   $9.41
Co-product AISC per ounce of payable silver equivalent $14.73   $14.80   $15.51   $14.33
               
Payable ounces of silver 2,293   2,667   8,282   9,482
By-product cash cost per ounce of payable silver $6.02   $4.83   $6.31   $2.17
By-product AISC per ounce of payable silver $11.12   $12.13   $11.3   $10.24

 

1 Exploration costs are not related to current operations.

2 Represent reductions on customer invoices and included in Sales of the LGJV combined statement of income (loss).

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 Payable silver equivalents utilize the average realized prices during the year ended December 31, 2023, of $24.33/oz silver, $1.10/lb zinc, $0.97/lb lead and $1,818/oz gold and the average realized prices during the three months ended December 31, 2023, of $22.36/oz silver, $1.10/lb zinc, $0.95/lb lead and $1,789/oz gold. Payable silver equivalents utilize the average realized prices during the year ended December 31, 2022, of $20.72/oz silver, $1.58/lb zinc, $0.90/lb lead and $1,678/oz gold and the average realized prices during the three months ended December 31, 2022, of $21.35/oz silver, $1.09/lb zinc, $0.89/lb lead and $1,591/oz gold. Realized prices include the impact of final settlement adjustments from sales.

 

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The following table provides a breakdown of cash flows used by investing activities of the LGJV:

 

 

Three Months Ended

December 31,

 

Twelve Months Ended

December 31,

(in thousands) 2023   2022   2023   2022
Cash flow used by investing activities $15,927   $20,376   $57,087   $82,279
               
Sustaining capital $11,701   $19,490   $41,571   $76,526
Resource development drilling 2,965     13,464  
Materials & supplies 97   (8)   600   327
Amount included in accounts payable 1,164   894   1,452   5,426
Total $15,927   $20,376   $57,087   $82,279

 

The table below reconciles EBITDA, a non-GAAP measure to Net income for the Company:

 

 

Three Months Ended

December 31,

 

Twelve Months Ended

December 31,

(in thousands) 2023   2022   2023   2022
Net income $12,330   $4,744   $12,860   $14,529
Interest expense   65   679   433
Interest income (656)   (105)   (1,332)   (154)
Income tax expense 114   700   114   1,565
Depreciation, depletion and amortization 5   48   79   180
EBITDA $11,793   $5,452   $12,400   $16,553

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The table below reconciles of EBITDA, a non-GAAP measure, to the LGJV’s Net income:

 

 

Three Months Ended

December 31,

 

Twelve Months Ended

December 31,

(in thousands) 2023   2022   2023   2022
Net income $24,943   $29,822   $53,443   $72,216
Interest expense 176   214   660   582
Interest income    (420)     (1,567)
Income tax expense (1,667)   14,818   8,147   37,306
Depreciation, depletion and amortization 15,552   17,040   75,110   69,380
EBITDA $38,584   $61,894   $135,793   $179,484

 

The following table sets forth a reconciliation of Free Cash Flow, a non-GAAP financial measure, to Cash (used) provided by operating activities operating activities for the Company, which the Company believes to be the GAAP financial measure most directly comparable to Free Cash Flow.

 

 

Three Months Ended

December 31,

 

Twelve Months Ended

December 31,

(in thousands) 2023   2022   2023   2022
Net cash (used) provided by operating activities ($2,485)   $5,874   ($12,020)   $14,554
Net cash provided (used) by investing activities 24,500   (33)   59,500   (60)
Free cash flow $22,015   $5,841   $47,480   $14,494

 

The following table sets forth a reconciliation of Free Cash Flow, a non-GAAP financial measure, to Cash provided by operating activities for the LGJV.

 

 

Three Months Ended

December 31,

 

Twelve Months Ended

December 31,

(in thousands) 2023   2022   2023   2022
Net cash provided by operating activities $38,212   $39,124   $142,001   $157,374
Net cash used by investing activities (15,927)   (20,376)   (57,087)   (82,279)
Free cash flow $22,285   $18,748   $84,914   $75,095

 

Please see Appendix A for the unaudited balance sheets of the Company and the LGJV as of December 31, 2023 and 2022, the related unaudited consolidated statements of income of the Company, unaudited combined statements of operations of the LGJV, and statement of cash flows for the years then end.

 

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 the progress of conversion drilling and exploration, production and cost guidance for 2024, and expected or potential feed grades, mine debottlenecking, processing rates, capital costs and exploration expenditures, are forward-looking statements. Forward-looking statements are based on management’s beliefs and assumptions and on information currently available to management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements, and such other risks and uncertainties described in our filings with the U.S. Securities and Exchange Commission and Canadian securities commissions. Gatos Silver expressly disclaims any obligation or undertaking to update the forward-looking statements contained in this press release to reflect any change in its expectations or any change in events, conditions, or circumstances on which such statements are based unless required to do so by applicable law. No assurance can be given that such future results will be achieved. Forward-looking

 

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statements speak only as of the date of this press release.

 

Investors and Media Contact

 

André van Niekerk

Chief Financial Officer

investors@gatossilver.com

(604) 424 0984

 

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APPENDIX A

 

GATOS SILVER, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

    As of December 31,
(US$ in thousands)   2023   2022
ASSETS        
Current Assets        
Cash and cash equivalents   $ 55,484   $ 17,004
Related party receivables   560   1,773
Other current assets   22,642   16,871
Total current assets   78,686   35,648
Non-Current Assets        
Investment in affiliates   321,914   347,793
Deferred tax assets   266  
Other non-current assets   38   60
Total Assets   $ 400,904   $ 383,501
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current Liabilities        
Accounts payable, accrued and other liabilities   $ 33,357   $ 26,358
Non-Current Liabilities        
Credit Facility, net of debt issuance costs     8,661
Stockholders’ Equity        
Common Stock, $0.001 par value; 700,000,000 shares authorized; 69,181,047 and 69,162,223 shares outstanding as of December 31, 2023 and December 31, 2022, respectively   117   117
Paid-in capital   553,319   547,114
Accumulated deficit   (185,889)   (198,749)
Total stockholders’ equity   367,547   348,482
Total Liabilities and Stockholders’ Equity   $ 400,904   $ 383,501

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GATOS SILVER, INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

(US$ in thousands, except for share data)   Three Months Ended December 31, Year Ended December 31,
  2023   2022 2023   2022
Expenses              
Exploration   $ —   $ — $ 26   $ 110
General and administrative   6,531   8,501 25,688   25,468
Amortization   5   48 79   180
Total expenses   6,536   8,549 25,793   25,758
Other income              
Equity income in affiliates   17,700   20,703 33,622   45,230
Legal settlement loss   (1,500)   (7,900) (1,500)   (7,900)
Interest expense     (65) (679)   (433)
Interest income   656   105 1,332   154
Other income   2,124   1,150 5,992   4,801
Total net other income   18,980   13,993 38,767   41,852
Income before taxes   12,444   5,444 12,974   16,094
Income tax expense   114   700 114   1,565
Net income   $ 12,330   $ 4,744 $ 12,860   $ 14,529
Net income per share:              
Basic   $ 0.18   $ 0.07 $ 0.19   $ 0.21
Diluted   $ 0.18   $ 0.07 $ 0.18   $ 0.21
Weighted average shares outstanding:              
Basic   69,167,601   69,162,223 69,163,564   69,162,223
Diluted   70,074,615   69,309,019 69,536,298   69,309,019

-Page 11 of 15-

 

GATOS SILVER, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

    For the year ended December 31,
(US$ in thousands)   2023   2022
OPERATING ACTIVITIES        
Net income   $ 12,860   $ 14,529
         
Adjustments to reconcile net loss to net cash used by operating activities:        
Amortization   79   180
Stock-based compensation expense   5,336   2,840
Equity income in affiliates   (33,622)   (45,230)
Other   1,159   199
Deferred tax asset   (266)  
Dividends from affiliates     30,775
         
Changes in operating assets and liabilities:        
Receivables from related-parties   1,213   (180)
Accounts payable and other accrued liabilities   6,992   24,632
Other current assets   (5,771)   (13,191)
Net cash (used) provided by operating activities   (12,020)   14,554
         
INVESTING ACTIVITIES        
Purchase of property, plant and equipment     (60)
Capital distribution received from affiliate   59,500  
Net cash provided (used) by investing activities   59,500   (60)
         
FINANCING ACTIVITIES        
Credit Facility repayment   (9,000)   (4,000)
Financing costs     (106)
Net cash used by financing activities   (9,000)   (4,106)
 Net increase in cash and cash equivalents   38,480   10,388
Cash and cash equivalents, beginning of period   17,004   6,616
Cash and cash equivalents, end of period   $ 55,484   $ 17,004
         
Interest paid   $ 417   $ 645
Supplemental disclosure of noncash transactions:        
Recognition of Right of Use Asset and Lease Liability   $ —   $ 128

-Page 12 of 15-

 

LOS GATOS JOINT VENTURE

COMBINED BALANCE SHEETS

(UNAUDITED)

 

  As of December 31,
(US$ in thousands) 2023   2022
ASSETS      
Current Assets      
Cash and cash equivalents $ 34,303   $ 34,936
Receivables 12,634   26,655
Inventories 16,397   11,542
VAT receivable 12,610   21,531
Income tax receivable 20,185   27,039
Other current assets 1,253   4,138
Total current assets 97,382   125,841
Non-Current Assets      
Mine development, net 234,980   232,515
Property, plant and equipment, net 171,965   198,600
Deferred tax assets 9,568  
Total non-current assets 416,513   431,115
Total Assets $ 513,895   $ 556,956
LIABILITIES AND OWNERS’ CAPITAL      
Current Liabilities      
Accounts payable and accrued liabilities $ 38,704   $ 46,751
Related party payable 560   1,792
Equipment loans   480
Total current liabilities 39,264   49,023
Non-Current Liabilities      
Lease liability 208   268
Asset retirement obligation 11,593   15,809
Deferred tax liabilities 3,885   1,354
Total non-current liabilities 15,686   17,431
Owners’ Capital      
Capital contributions 455,638   540,638
Paid-in capital 18,186   18,186
Accumulated deficit (14,879)   (68,322)
Total owners’ capital 458,945   490,502
Total Liabilities and Owners’ Capital $ 513,895   $ 556,956

-Page 13 of 15-

 

LOS GATOS JOINT VENTURE

COMBINED STATEMENTS OF INCOME (LOSS)

(UNAUDITED)

 

  Three Months Ended December 31, Year Ended December 31,
(US$ in thousands) 2023   2022 2023   2022
Revenue $ 73,509   $ 92,994 $ 268,671   $ 311,724
Expenses            
Cost of sales 28,011   25,525 111,266   107,075
Royalties 339   330 1,363   3,069
Exploration 757   3,565 2,875   9,800
General and administrative 5,375   4,461 18,068   14,307
Depreciation, depletion and amortization 15,552   17,040 75,110   69,380
Total expenses 50,034   50,921 208,682   203,631
             
Other expense (income)            
Interest expense 176   214 660   582
Interest income (420)   (1,567)  
Accretion expense 279   276 1,145   1,103
Other expense (income) 728   (766) 741   (766)
Foreign exchange gain (564)   (2,291) (2,580)   (2,348)
  199   (2,567) (1,601)   (1,429)
             
Income before taxes 23,276   44,640 61,590   109,522
Income tax expense/(recovery) (1,667)   14,818 8,147   37,306
Net income $ 24,943   $ 29,822 $ 53,443   $ 72,216

-Page 14 of 15-

 

LOS GATOS JOINT VENTURE

COMBINED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   For the year ended December 31,
(US$ in thousands)  2023  2022
Cash flows from operating activities:          
Net income  $53,443   $72,216 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation, depletion and amortization   75,110    69,380 
Accretion   1,145    1,103 
Deferred taxes   (7,623)   21,013 
Unrealized gain on foreign currency rate change   (4,523)   (4,434)
Other       (174)
           
Changes in operating assets and liabilities:          
VAT receivable   9,619    23,986 
Receivables   14,021    (15,393)
Inventories   (5,273)   (353)
Unearned revenue       (1,714)
Other current assets   2,494    661 
Income tax receivable   10,771    (27,039)
Accounts payable and other accrued liabilities   (5,951)   17,939 
Payables to related parties   (1,232)   183 
Net cash provided by operating activities   142,001    157,374 
           
Cash flows from investing activities:          
Mine development   (36,637)   (44,934)
Purchase of property, plant and equipment   (19,850)   (37,018)
Materials and supplies inventory   (600)   (327)
Net cash used by investing activities   (57,087)   (82,279)
           
Cash flows from financing activities:          
Capital distributions   (85,000)    
Equipment loan and Lease payments   (547)   (5,439)
Partner dividends       (55,000)
Net cash used by financing activities   (85,547)   (60,439)
           
Net increase (decrease) in cash and cash equivalents   (633)   14,656 
Cash and cash equivalents, beginning of period   34,936    20,280 
Cash and cash equivalents, end of period  $34,303   $34,936 
Interest paid  $660   $236 
           
Supplemental disclosure of noncash transactions:          
Asset retirement obligation  $5,364   $ 
Mine development costs included in accrued liabilities  $10,205   $3,427 
Property, plant and equipment included in accrued liabilities  $11,046   $2,648 
Materials and supplies included in accrued liabilities  $1,018   $202 
Recognition of Right of Use Asset and Lease Liability  $   $328 

-Page 15 of 15-