Gatos Silver, Inc. (NYSE:GATO) (TSX: GATO) announced its third quarter of 2024 financial and operating results including earnings per share of $0.14, up 200% from $0.05 in the third quarter of 2023. The Company will host an investor and analyst call on November 12, 2024, details of which are provided below.

The Company has a 70% interest in the Los Gatos Joint Venture, which in turn owns the Cerro Los Gatos mine in Mexico. The Company’s reporting currency is US dollars.

On September 5, 2024, Gatos Silver and First Majestic Silver Corp. announced that 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 Merger is expected to close in the first quarter of 2025 and would consolidate three world-class, producing silver mining districts in Mexico to create a leading intermediate primary silver producer.

On September 25, 2024, Gatos Silver reported an updated life of mine plan that adds two years of additional reserves and a 36% increase in silver equivalent production compared with the prior LOM plan at CLG.

Production for the third quarter of 2024 and improved guidance for the full year were disclosed on October 9, 2024.

“CLG’s strong third quarter 2024 production and cost performance together with higher metal prices resulted in record quarterly free cash flow at the LGJV and a record quarter-end cash balance for Gatos Silver,” said Dale Andres, CEO of Gatos Silver. “We believe we are well positioned to deliver significant value into the combination with First Majestic given the Company’s strong cash position and free cash flow generation together with CLG’s track record of performance, the extended mine plan disclosed in September and ongoing exploration efforts across the broader Los Gatos district.”

Summary

LGJV Q3 2024 results compared to Q3 2023 (100% basis):

• Revenue of $93.8 million, up 40% from $67.0 million
• Cost of sales of $31.2 million, down 1% from $31.4 million
• Record net income of $25.7 million, up 71% from $15.1 million
• Record EBITDA¹ of $57.2 million, up 87% from $30.6 million
• Record cash flow from operations of $58.2 million, up 98% from $29.4 million
• Record free cash flow¹ of $42.6 million, up 199% from $14.3 million
• Silver production of 2.42 million ounces, up 9% from 2.22 million ounces
• Silver equivalent production² of 3.84 million ounces, up 11% from 3.46 million ounces
• Co-product AISC¹ of $16.13 per ounce of payable silver equivalent, down 9% from $17.64
• By-product AISC¹ of $9.61 per ounce of payable silver, down 35% from $14.71

Gatos Silver Q3 2024 results compared to Q3 2023:

• Net income of $9.9 million, up from $3.3 million, and adjusted net income¹ of $15.2 million
• Basic and diluted earnings per share of $0.14, up from $0.05 per share, and adjusted basic and diluted earnings per share¹ of $0.22 and $0.21, respectively
• EBITDA¹ of $9.1 million, compared to $3.2 million, and adjusted EBITDA¹ of $14.4 million
• Cash flow provided by operating activities and free cash flow¹ of $34.2 million, compared to $33.3 million

__________________

¹ See “Non-GAAP Financial Measures” below.
² See definition of silver equivalent production below.

At the LGJV, the 40% increase in revenue in Q3 2024, compared to the same quarter in 2023, was primarily attributable to higher sales volumes and higher realized metal prices. Cost of sales decreased by 1% despite the higher sales volumes. Site operating unit costs of $96.93/t milled were 8% lower than in Q3 2023 primarily due to higher mill throughput in the quarter. By-product AISC¹ per ounce of payable silver decreased to $9.61 primarily due to significantly higher silver and by-product production and sales volumes.

For Gatos Silver, higher unadjusted and adjusted net income, earnings per share and EBITDA¹ for Q3 2024 were primarily attributable to the higher equity income from the LGJV and higher interest income. General and administrative expenses were higher in Q3 2024, mainly due to $5.3 million of costs related to the proposed Merger with First Majestic (which are excluded from adjusted net income¹, adjusted earnings per share and adjusted EBITDA¹ as described below), partially offset by a decrease of $1.1 million in non-cash stock-based compensation expense, a $0.9 million decrease in legal and consulting fees not associated with the proposed Merger, and a $0.4 million decrease in insurance expense.

As of September 30, 2024, the Company and the LGJV reported cash and cash equivalents of $116.7 million and $33.9 million, respectively. The Company’s quarter-end cash balance was a new record, up 40% from $82.5 million at the end of June 30, 2024. The increase in cash was due to $37.9 million of cash distributions received during the third quarter. As of October 31, 2024, the Company and the LGJV had cash and cash equivalents of $114.8 million and $47.3 million, respectively. On November 7, 2024, the LGJV made a capital distribution to its partners of $40.0 million, of which the Company received $28.0 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 and nine months ended September 30, 2024 and 2023. For a detailed discussion of the three and nine months ended September 30, 2024 financial and operating results refer to the Form 10-Q expected to be filed on November 12, 2024 on both the EDGAR and SEDAR+ systems and posted on the Company’s website at https://gatossilver.com.

Los Gatos Joint Venture

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 nine months ended September, 2023 would be 3.41 million ounces and 10.30 million ounces, respectively, using price assumptions for 2024.
⁴ Realized prices include the impact of final settlement adjustments from prior period sales.

Gatos Silver, Inc.

¹ See Non-GAAP Financial Measures below.
² Totals may not add up due to rounding.

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. announced that 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 “Merger”). The proposed Merger would consolidate three world-class, producing silver mining districts in Mexico to create a leading intermediate primary silver producer. Information relating to the proposed Merger can be found at the Company’s website at www.gatossilver.com.

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.