Gatos Silver (GATO) 7 May 242024 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to Gatos Silver's First Quarter 2024 Results Conference Call. Presenting today will be Dale Andres, CEO of Gatos Silver; and Andre Van Niekerk, Chief Financial Officer.

We will conclude today's session with a question-and-answer period for other members of the Gatos Silver management team will be available. [Operator Instructions] Turning your attention to Slide 2. contains call today's note forward-looking statements. Please and that the risks update forward-looking uncertainties the may vary to any results actual statements. silver to cause obligation Various does assume not like to now I call turn over would Dale to Andres. the go Please ahead.

you, Thank morning, and good operator, everyone.

X. Slide to Turning

operating record flow generation performance mill quarter throughput the continued venture joint cash Los The rate. XXXX. Gatos and set strong in first Our of yet another

on and day. our X,XXX rate quarter, to of mill over we we are per tonnes tonnes the target well During medium-term throughput day, way at our of averaged X,XXX production a sustainable per

Our in the the Cerro for production of in first and production remainder Gatos half quarter range. expected is puts a strong guidance Los year the us of the top position our

of our the in the range the this the strengthening performance inflationary for metrics peso result guidance all-in cost half year operating are to quarter, full and despite of the strong a expected sustaining lower remain As pressures.

had receive April from first this Los over Gatos detail, free silver want the but highlight regular more Capital flow to cash cash I in venture. to received the million distributions Andre joint talk XXXX this year. distributions continues over do in million balance cash about of and end $XX Capital continuing of will quarter of April. of joint the in Silver $XX a the of at venture's

third quarter extend and track on also mine year update in our this are to the aiming of We lives. throughput to life are mine the and increase plan

in Gatos on other up to now near both mine district. the started prospective targets have highly we efforts Los ramp Importantly, and exploration

Turning to Slide X.

quarter. to grades over lower throughput per mill tonnes higher XXXX with million includes starting production, silver the gold expected similar plan. at the at ounces the in copper As mine soon X.X silver silver in throughput lead in compared comparable day, zinc, was million X,XXX Production now offset ounces mentioned quarter which a the and for quarter X.X and was with equivalent by as and before,

of day, best mill average record. In March, per rate achieved was an the throughput X,XXX over tonnes we monthly performance on which

modifications made mill we mill calendar on at tonne the this the per With day year, believe the rate day X,XXX the already is basis. a minor and capacity current that

However, mill, first to bottleneck. through achieve that levels, mining which and need continue can the to to then these sustain show we rates, the be we increase

and of Cost the quarter on primarily increased the control. tons sales We and mine other have processed last fleet, to and optimizing various operational year, those increase but was in underway projects, to for to sold. maintenance support the the mining increase initiatives by schedules including quarter comparable including core plants XX% rights execution short concentrate focus tonnes increase the improvement major higher rates interval to rebuilding this first the a XX% compared XX% in the due mining

$X now. for were quarter during over payable and Cost the in impacted just sales ounce Mexican over credits. range to of half the is first XXXX. X our the for upper Slide half in of now production be full of speaking that guidance lower XXXX year and expect our We range I'm to guidance by-product XXXX, an to compared strengthening of All-in the by ounce continued the silver that's ounce also We're an costs per the after in $XX of and quarter. just sustaining of peso

tracking midpoint X% the equivalent silver are respectively, production below you XX%, XX% see metrics guidance quarter. are unit and the and midpoint to the in and As in our cost silver at can first table, compared of

be and full that Los half average area $XX in of year. guidance on at per for the X,XXX development approximately exploration strong expect in other as spend the XXXX day on definition Gatos to million, XXXX Based $XX to of range rebuilds those the rates that's performance top first the tonne with majority underground and expect to Cerro drilling the for and in throughput sustaining our the we at now of projects, quarter, some X,XXX equipment We the still with be up on our spend South-East opening to and mine and expenditures I the infrastructure capital million mentioned. continued focus mine

I'll to now over turn to our the present Andre results. call financial

generation. XX% by joint Good Gatos $XX $XX.X XX% performance cash $XX.X and yet Dale. million underscored flow on QX another of you, $XX.X cash higher Thank in than provided morning, this quarter the operations is robust was by strong million. The approximately QX free everyone. in generated flow the operating million Los Cash joint venture's lower flow than XXXX of venture million quarter, XX% XXXX. The

XXXX. last quarter million the prices lower South-East comparable resource flow the $XX.X with million from investing quarter, used totaled drop than on realized was XXXX for year to $X.X most Of associated and QX primarily infill QX that costs and $XX.X largely and the to development spending amount, of with of mining in QX drilling due the higher in Deeps. was The XXXX in going operating processing Cash million higher in rates. activities the focused similar metal the

a a distribution in million in As free of result generation cash venture the strong the of first the continued made February. quarter, capital joint flow $XX

made to a in quarter, reminder, million. April, the end of XXXX. total in $XX quarterly million partners further the the of venture joint the distributed capital of a Subsequent a was $XX As to distribution

metal to volumes the offset the X for Slide Los quarter financial XXXX. joint late zinc to the lower sold in by Gatos at solar, and to prices. $XX.X results venture look were first Revenue of increased million the significantly quarter. Higher turning of Now of

a due partly the adjustment QX a improvement and processing in adjustment to XXXX. strengthening a of the by result improvement adjustment offset million $XXX,XXX by of was impacted the of initiatives a tonnage and as U.S. XX% the productivity in of XX% reduction against revenue continuous as XX%, our quarter increase further sold. sales Mexican by was Cost $XX.X compared mill in increase negative part costs in cost increased provisional to of peso dollar, negative which program. and concentrate this mining The sales higher Cost of throughput a primarily were

Depreciation, recent the lower additional depletion to to in mineral X%, approximately the XXXX period. than the extension Offset the the lower capital by primarily on million income of and quarter DD&A by expense additions. The life. reserves and of primarily due decreased tax for was for the amortization in QX taxable XX% mine $X.X increase due income expense

approximately recorded the XX% the net LGJV income QX than Finally, in million quarter, $XX.X lower XXXX. for of

with million share. from That's the basic per recorded QX $X.XX diluted up Silver Silver. Moving Gatos financial for on net and XXXX. X to XXX% to Gatos results review of Slide $X.X income in or partly due income to the offset equity reduction in the the lower to income the by $X.X increased Equity affiliates under distribution LGJV. million agreement obligation priority from primarily Dowa a

to higher stock-based $XXX,XXX QX mainly as fees. Corporate XXXX grants and QX and XXXX in legal due of nonrecurring in G&A in noncash approximately in was million $XXX,XXX compensation increase expense a equity than than XXXX a increase $X.X a result XXXX

Turning to Slide X.

of $XX mentioned was million. Gatos As Dowa and $XX earlier, a to first of paid the venture during Silver capital we quarter, received which million the partners, its joint distribution

of a portion Canadian insurers the the cash now company's is is end million As Silver of distribution funded settlement the payments April million, XX, the $XX.X these lawsuits cash made and of along both April, first approval, end by quarter we the which capital end balance balance bringing amount of fully final with received the LGJV and the distribution our at after we million The also of of of has $XX.X balance U.S. quarter After Gatos the been cash class a the another result, The the in with company, have court made. to $XX April million. which expect pending action $XX.X ended XX. QX. the at of

and The of a LGJV XXXX. and remains million a now and million balance quarter balance the place. the $XX remains XX, the of hand to revolver million at in with $XX I back cash Dale. April GSI cash debt-free, had will Both ended company's it first LGJV $XX.X

costs wanted pressures, X highlight inflationary We increase the our substantial and per in including And at X% year costs, Thanks, labor over Slide throughput Site despite Mexican results business by operating how delivering ton peso. decreased past Andre. a improvement to are the X.X% per mine. and initiatives to strengthening the turning years, increased the XX. have of

cost improvement programs contributed continuous lower ton. numerous optimization and the per also Our cost to

the the are geometry long On and more design fill successfully where conditions mining more including cost-effective of our side, switched we method. and areas ground have is stopes, haul mining transfer a which suitable stoping, cut from to

and achieving day our day towards to X,XXX continuing medium to work at the and the are in rate, initiatives underground on this productivity the to tonnes working year program per mining first per extend tonne further sustainable we're X,XXX term. towards which our currently X,XXX rebuild We that equipment then

to Turning Slide XX.

our mineral the per X,XXX extension and -- the mine. mine updated of We of the with plan at third this the throughput are day, Even throughput on looking life to of track we're mining mineral and in to tonnes even the still and current And that. an reserves rate of plan targeting plan quarter we life year. reserves expect some our XXXX -- the in averages increasing more with faster provide

XXXX between did quarter, up completed life resource XX-month to to the drilling Deeps. spacing, on the that's over end end further conversion Deeps targeting done XXXX plan of on an trends been the drills still of based that South-East the made March we South-East first new X time dedicated to higher-grade mine have XX cutoff. April of data and we've in XX-meter was expansion zone. on We past that In now kilometers be additional will The drilling that drilling of the frame, infill and period the the

On the this and for of engineering making quarter copper recovery circuit anticipate decision detailed in side the are we a separation completing year. third of a things,

gold evaluating also are the options and of for zinc. We recovery increasing silver, various technology and

key underground Turning potentially a infrastructure. that kilometers targets to of XX. within and figure workings existing This from mine shows existing few few a are the accessible the of Slide

are work to reserve cutoff XXX,XXX the the on we that land rest hectare the opportunity that have excited passed Now of package. up database update, exploration ramp this by our for year's we

critical the Vice really these and Technical business. parts end After Services, Exploration to announced new President Yuhasz, guide of on of of Chad we we the of quarter, board our have our Chad appointment pleased to and the are

are kilometers to be starting First into production. bring we find X it as on we of here within anything X operations targets the up, mine will easiest to

rigs mine the Portigueño from [ hole fault along Gatos Tule along south have first the the working Dragon towards towards fault. the stepping do of the X the now area We Roha And are and stepped Southeast now and out in will the mine the Cerro third to and target Northwest moving rig next be -- weeks. the ] then A greenfield Deeps on target within the central basin fault few further Gatos from the Los targets. in and Deeps

Gatos about the optimization we which some in will part the about in the of further XX later a mine is surrounding of northwest. together core in targets our be year throughput and X drill targets Luis Slide prospective mill getting to improvements We mine very drive increases Lince area in number kilometers Cerro rigs continue the and And of cost in On with area, the operating northwest from Los San summary, kilometers strategy. the productivity safely business the XX. the to with out and

together including developing of the drilling initiatives, this with year, incorporates the circuit. plan by on focused remain We quarter of Deeps the rates life other in copper value-enhancing throughput Southeast third higher which mine new conversion a

we We Portigueño discussed. continue and the in highly to I near increase start excited and which as very Northwestern district, drilling prospective and Central our large district be including mine to the Deeps,

strong we distributions balance. the for flow questions. margins And cash I to generate now Gatos it and hand regular joint the growing operating from and importantly, expected to venture continue with a will back Los operator cash

Instructions] your with Cosmos comes line the question And from first CIBC. [Operator Chiu of

Dale and Andre team. and

exploration silver look was Southeast certainly But from as As you lot reading of at up I higher early is I question and And here. Deeps on Central that your mentioned zone grade versus I Northwest it. credits, when Deeps. the decreases release in the my byproduct with read guess, a upside press you central South-East April zones. on

QX. XXX-gram can it? of about through life expect the So and can of right we expect at What come with that's can that you getting to tonne. now, sitting kind What mine in your reserve grade as we plan describe is we your extent updated per

Deeps. those some Thanks the right going ask Yes. drill And on to provide incorporating will for the in South-East I'm results resource the modeling say color that. in to process question. But and of I the doing work we're Tony

don't want I there's comment a further, grade on so target. lot think Tony, to say you a And please? specific But we do can

mean, what off. said. the for we've Like, probably we Thanks question. Cosmos. just it I think Dale really I'll kicked just echo

just actually and can we gets So bunch terms up where I that I we -- we've we of until like a into it. design, stuff. think reserve go lot I'm for work, those you from dilution report the sort can't of exploration that the to done end comment have there's you of of things and on look in a There's where how of out cutoff really out whole much a stope effectively use at the can similar mean sort recommend we of that to those I put have press you we see what releases we that and work. sure what

zinc it's in and that the is silver and good metals. So what a but of higher those that base you'll is lot lower. copper lead There's particularly see from

And you a numbers actually is commit at of we until to look can have we've the so to I all those, mean, can't guide to do work. but all sort done I final

XXX Of per asked course. that lot And us tonne. that resource remind a Could Southeast different now grade is is Dale, grams Deeps? of I from Tony your a see and way, resource right you maybe

lot a Yes, of that.

trying to what that's you're So convert.

trying resource Eats. Yes. Of expand we're if think Tony Southeast the I'd to think convert convert over it's of we're trying -- I And the just And tonnes, or me. on it's X.X recall portions this, correct Tony, highest you obviously. to grade that, million but million I I X.X -- can correctly, can inferred X in say

the very for are as nicely, lower than the metals is differentiator Tony on are zone the silver as grades reserve a that holding that we and mentioned, to grades But but expected be key based copper well. results base up have,

this also you we've about dual was as a two, the the terms talked to In with updated Tony one, of life terms trying of this the in track number And do number maintain sort talked kind of what last of and Dale Is year of the when when mine well, in plans mine and one target there the life grade. past. you're like life plans. still in reserve and and of about background replacement that past, year both of targeting these always to in the of each mine every hopefully

script day, things. around and trying One, time we're mentioned it say -- to I'd increase this Yes, to driving to have was do to mine at go see can and how and I would tonnes throughput be continue incorporate but the in to that per a towards mine X target work, life we'll us. increase as we into do life. of throughput rates, we are sustain our the higher clearly rates those X,XXX we for mine planning plan We the new that's through plan extend whether we

-- enhancement on a that life unit of grades, our operating tonnes bake we plan make rates. as decision able and just well, as we're that's a including the X,XXX extend do to we're And we'll as I previous of as currently into lower taking to per to again we're of a -- through work. and throughput our mine able margin to and going mine just averaged then cost. the all circuit, to take that's are tonnes that throughput copper plan but those And life, the day. efficiencies, new just operating to looking higher And mine And said, lower X,XXX and do continuing we well just above taking rates, higher life continue day, per we reminder, lower

$XX mentioned, Dale, sweep debt getting as these you We're and And follow-up exploration. sheet you're cash the maybe million broader great-looking balance days. scale No as and as about $XX in venture in from only and well. joint a a cash. million spending

next? everything what's to organic As So the as looking you grow you Is well. company? externally are continue really internal

the new -- you the plans VP budget. about place, increasing growth team exploration maybe in potentially are increasing now talk exploration, you with Can new exploration

exploration So company? increase? external, grow we the to budget see And internal, continue are can going again, how you to

highlighting joint cash which And $XXX that We're venture, our April, of million $XX was end million. including you for Cosmos share over you if take out. the as of is the cash, Thanks at that sitting pointed the $XX million, on the Yes. balance. combination over of

from that and year clear, ramp-up the is a be million and million $XX have our and did what to Just for we made we the all $XX after from distributions venture this last is that year. exploration joint expenditures, do plans

extension though tag There do into mine. or we're bills that about you and the resource color. something greenfield $XX Tony, pure is of call now, and half additional some that budget, working If interesting, some trust on -- even of maybe, we conversion that. more to perspective really from comment on half an put much me, what exploration, only million Right near I so can Cosmos, and and is on we work exploration that provide would we towards will dollars can

drilling. it's we're have that a we make plethora prioritizing of lots first. those, targets, and to need to best still areas work But start the doing We're sure XX important make attacking position we're properly the make a and months. We've over do. sure we're drilling, And done to last in sure there's we foundational that a lot to XX work the work to we of of to are

ramping I just here going do such to we're want years. you bit that. if to big be yes, to Tony, don't at know need expand property, we a up be on about just But careful a many for

doing want modifying to the we the we're get. think I I exploration make realistically, on pretty sure it captured we mean that program there you Dale. of that results we're that and look, good mean I sort well,

drill out want program following and massive just to and a it go So we properly. not be don't

of So doing going do we actually work. the that within right that have do to it the sensibly we're and are to make sure capacity it sort we

So it sensible is are I up, level can think we're -- I ramping that doing make good, where we that we exploration. this a but I mean, think sure

And then well. opportunities. we current at do beyond comment opportunistically on things grow maybe the the our company. will We're the we to need of we anything going at not just are but Cosmos. question, pick your about But look to district, specifically. as part to opportunistically looking to other up And don't will look We anything other

you out. sheet, great We have a pointed balance as

questions the are Those have. I

at are Andres, turn the Instructions] There [Operator you. call no further questions Mr. time. this over I back to

Thank operator, to the everyone thanks and the updating Thanks to in call. again. as year participating you, you look We forward progresses.

call. conference today's concludes This

You disconnect. may now