Gatos Silver (GATO) 7 Aug 242024 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to Gatos Silver Second 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 where other members of Gatos Silver management team will be available. [Operator Instructions].

Slide to attention your X. Turning call Please statements. forward-looking note today's contains results may Various uncertainties actual to risks and cause vary. does to statements. update Silver any Gatos not forward-looking assume the obligation And call turn like now Dale to Andres. the I would over to ahead, go sir. Please

Thank you, operator, everyone. good and morning,

strong cash start due cash X. performance performance excellent the and flow operating quarter. Los from to the to had venture free highlighting Gatos the operations Turning to joint metal like flow. record higher with primarily prices Slide The I'd quarter. the This financial was in revenues, and record record in

venture As during previously the mill. announced, per set continue towards the yet and of quarter medium-term record Los to throughput tonne Gatos sustaining mill our rate meaningful X,XXX progress joint achieving day for through we make another the target a

results puts in us guidance. position a annual our to quarter Second production achieve strong

the the the of this metrics to As operating starting half lower for a range although to strong that weaken full is pressures peso, XXXX, XX% our cost remain Gatos year cash the strong first result quarter. joint increase of are to free of million I would the expected in of also the despite like ventures the inflationary and our flow $XX all-in the the sustaining continued of performance guidance first in almost Los second year. quarter to in highlight half compared a quarter,

on September. $XX are of to made the progressing Gatos our at of we the distribution on to July. $XXX Silver balance Keeping life cash mine well, a results July. announce of million a nearly And end new is cadence, venture joint in track a and Work had the in plan as result, quarterly our million

and also We are life. the extend to increase mine aiming throughput

from in that talk Los the both on drilling more the other drilling in second the Southeast our District. mine more to I'll exploration about presentation. near Gatos we in highly infill the prospective on deeps greenfields main focus and quarter, shifted During targets later

X,XXX the in But day, and of the throughput sixth to than being X.X second quarterly past bit X.X of ounces equivalent production Mill consecutive and production, and was per compared tonnes year, little silver Slide quarter throughput includes at second finishing the first, the in turning and a Mill were XX% to this X. of second ounces quarter quarter gold last quarter million metal grades resulting XXXX, higher quarter. for the million higher which record. for zinc, lead at and copper silver

and the tonnes operating regularly Mill X,XXX we rate and and previously, have basis, fleet the including an achieve as bottleneck the stated which a various that's improvement between a equipment calendar to projects, X% this operational mill further throughput operational we running with improvements, underground initiatives day at have number execution. address quarter-over-quarter is planning, of rebuilding X,XXX bottleneck, to focused are on underway increased throughput per and mining day of on and maintenance

for the this costs lower costs higher per comparable quarter to the due quarter operating year. last were second higher X% the quarter Site in production XX% quarter, and the in than last that's tonne and approximately rates. than unit were year, $XXX primarily Cash that's

to pressures. continued the cost offset strong peso inflationary the initiatives improvement continuous and Our

and is the silver in over of tonne and sales. X. range and last payable were Slide bit range Los last XX% production well that guidance, and by that's strong co-product quarter basis, Cerro the second XXXX, lower expect on Based helped again, our $XX, ounce credits payable to at just guidance more by-product basis, ounce on which to production that's we per All-in moving continue the sustaining XX% equivalent the guidance our Gatos to expect half and that's than costs strong $X.XX, than the for on be sustaining guidance below year XXXX. upper first All-in rates to throughput within costs a half in for in lower for year to per of in And of year, and the to XXXX. a and X,XXX after guidance production our we quarter the by-product the half were top silver second of X,XXX day per range for our year and full range average year, was continue

XX% production drilling expect tracking equivalent guidance As below you of for a equipment the table, We in million expenditures half cost and be on metrics the compared $XX our midpoint in the of see $XX development silver rebuilds. of are approximately year. with the basis focus on to exploration continued with up majority mine and the the be and first to year-to-date spend capital can approximately opening the the midpoint spent about on are and silver XXXX million definition at Southeast CapEx and sustaining to area unit still underground

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

Thank you, Dale.

in to morning, Cash resulted realized owned cash prices and in flow provided by $XX.X flow X. operations XX% million, everyone. Moving The metal Gatos operating quarter venture another joint Slide performance strong a million generation. million strong XXXX, quarter, in was the Good robust approximately at higher Los of new than The XXXX, JV quarterly record cash $XX.X LG QX for XXX% LG $XX.X new XX% flow generated free a record. QX and the million JV. this also $XX.X of higher

on million costs, lower revenues year offset that XXXX. primarily higher to million $X.X QX XXXX, was million to The investing partially Of flow on significantly quarter in in last capital used Cash expenditures QX was and $XX.X resource increase volumes. was amount, the spent our drilling. due from than operating sustaining by comparable largely $XXX,XXX due higher $XX.X in development activities

a in subsequent free million end quarter, to April LG of generation made distribution million made flow The the of $XX continued capital the distribution July, in joint as venture second capital a strong result the JV of $XX XXXX. cash the And the in a quarter.

to Los of metal the the for quarter. at of of X million increased venture the volumes Now realized the Higher higher the in a in significant provisional a and quarter revenue to negative contributed The adjustment metal in revenue QX Gatos $X.X to was to second XXXX. to compared turning quarter. million sold Revenues adjustment the XXXX. XX% joint for adjustment $XXX,XXX $XX.X positive Slide financial results increase look prices

of sales peso processing primarily in XXXX. compared increase due were to and higher of Cost by as of of increase QX an Cost by associated further tonnage stronger increased XXXX a the sales XX% XX%, a concentrates the and impacted in mining in mill Mexican the sold QX throughput. costs result to XX%

by X% primarily to extension the partially by the expense the mine, decreased Depreciation, mineral reserves increase due offset of in additions. amortization approximately depletion and of and life capital

compared recorded tax million increased tax XXXX. LG of primarily to Income $X.X $XX.X the expense expense due to higher Income at million JV. in QX taxable was income

from recorded income income mainly significant million, $XX.X the higher $XXX,XXX result increase the JV net in LG approximately recorded QX XXXX, revenues. a of the Finally, net as a of

income Slide quarter QX loss compared million review results XXXX with the of in to $X.X income share to Basic increased general to XXXX. to this compared $X.XX was net $X.X and QX company Equity a of $XX.X $X.X earnings to financial LG for in QX expenses income were of Net million, to $X.X million regard net to incurred per million The $X.XX and last diluted loss quarter. in year. XXXX. the affiliates administrative million a share in second due Turning the the X to primarily compared of JV. per quarter net in increase of

September million these increase expect a increase $X.X $XXX,XXX also million to result are primarily and and after XXXX a do blackout as a to expense in of grants extended legal nonrecurring, XXXX. due costs in is continue we period increase $X.X equity beyond in other Most an fees. The compensation stock-based not it noncash consulting and of

XXXX. million stock-based G&A, the excluding from $X.X And $X.X of were X.X% compensation noncash the lastly, management to million for income quarterly received compared includes the QX quarter. LG other expense JV fees in

Turning X. to Slide

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

million Gatos of July million, LG The which the result, back balance JV to second had the a $XXX.X at and bringing XXXX. cash million, $XX.X the $XX balance to ended ended Dale. $XX.X cash Silver to and the hand July, of JV cash the the LG July a second XX, with of it a $XX $XX.X million million. In of joint at million continue company received cash will company's remain quarter made Both of now distribution balance with GSI debt-free. capital I venture a XXXX. As quarter balance another XX,

per performance Mexican increased the years, that the tonne XX, peso Slide helping together Thanks, X% are despite mill by and Site the operating decreased throughput. substantial that's costs the our cost with period. past highlights inflationary Andre. of to time strengthening business how improvement On pressures have X and over over initiatives drive

continuing efficiency medium per program X,XXX rate are mine in extend sustainably the per on equipment, our to and X,XXX our underground with our We workforce targets to to X,XXX focus rebuild and initiatives to on to our continuing other of term. tonne advancing at day including productivity up tonnes the equipment further current day

plan targeting our of in rate previously, Turning averages mine I mineral track significant and plan tonnes a per XX. driving incorporate of XXXX. in our quarter We day, the as to working to the updated increase. towards Slide And the we're X,XXX would are X,XXX as current to life throughput provide third remain plan so new we be on a target reserves mine said September, higher

rate. to extension higher an expect life notwithstanding still we of this mine, However, the

based zone spacing. this strike year. quarter completed XXXX expansion of to July. was the an the further deeps drilling, dedicated period, the in as a and was X period have We recent completed Southeast The up XX-month during late release to of XX-month on be first new was additional on that's strong of area for most the additional kilometers still reported results of over conversion exploration which this XX-meter end to that reminder, up reserve previous with been will this that along done our And drills XX drilling in March

year recovery we are and On of separation engineering of circuit copper a this the making completing for anticipate things, that. on detailed in plant second side decision half the a

to various currently evaluating and the are lost for tailings. zinc that options and finds from gold are being of technology increasing silver, We also recovery

approach key Slide highlighting within balanced this located existing on the targets The Turning a slide mine a few of images that we to show XX, organic growth kilometers to of our strategy. workings. are are the

Gatos a The our Los execution marked unlocking value second in the district. quarter clear towards pivot in

of resource immediately for the and brownfield With completion the Southeast update, towards drilling. infill XXXX reserve redirected efforts growth-related were extension the deeps program, and

continue can in to of to advance our the balance extension resource provides work XXX,XXX hectare increase of greenfields from district across exploration levels hopefully, At ensuring time, significant reserve life in early-stage required all mapping district between across through the the and we property knowledge additions. and targets our pipeline, that's same key our exploration the and

While we which excited this in we advance our additional drilling help exciting to for remain of and up about the to our value and potential drill. is us field district firm continuing mapping targets unlock programs programs, committed

On the to X are in drill the Starting Slide this completed have infrastructure. holes. this mid executing already last how XX, in Luis rig district. San of on we part of strategy we've the quarter, the it Gatos tangible mobilized from located Cerro our shows Northwest, X.X results Los kilometers and we target target in We the

with of wide branches faulting, holes results. precious Both veining and elevated and base Luis San intervals solicified in metal returned have

us, to We target. we drill results potential test are excited of lay and that this ahead about the continue

to northwest potential the and targeting portion zones which closer the of faulted central Los depth. Moving deeps mine, Cerro the have Gatos we're at we the

similar is this to deeps. so And Southeast the

a drill we this We framework mobilized and a in geological quarter the hole central the rig a drill done site, X,XXX-meter are last new began target mobilizing that drilling footprint was rig within new deeps. to and deep actually have

our Portigueño the untested This any we current key from target search in mine. area large located also immediately currently will our as directly our to infrastructure. target a below X kilometers a and Southeast, Further success approximately that's priority and is strategy the mine up have open

confirming are results drill structural anomalous geochemically corridor Our results. a complex returning

Our indicate to initial all are present discovery. drill program right the ingredients for continues possible a

advance off quarter. exciting second to to and strategy of unlock the the through in in build the realized Los our Gatos value continue XXXX, will remainder We to the plan balanced start district

productivity improvements So in to together throughput our optimization, summary, which a XX, core operating we continue safely increases mill business part our cost drive of and to be Slide with on and strategy. continues

value-enhancing targets, deeps our and on excited by that on in remain the focused copper our our we with I the and We continue of initiatives, district and near have, and that includes our drilling and exploration the be circuit, deeps life to other earlier, as we Southeast drilling and together mine prospective incorporates developing very Northwest mentioned that's mine district higher Portigueno, which including on conversion rates targets, new and large continue plan drilling September that highly the prospect. San Central we both and Luis throughput the

importantly, margins growing joint from cash regular the $XXX the and strong is the operating And company. and continue of million, growth distributions generate support flow expected future a we which to balance now corporate level that exceeds with venture available to at cash

I'll to now questions. back it the hand for operator

Kevin from first the of line Markets. BMO Instructions] Your comes question from [Operator O'Halloran Capital

seeing respect expectations And question, with the picture or impact anything can give Maybe around the hearing incoming us you any Mexican June? starting mining to thoughts with might from you're you? any that the administration in election or bigger

Yes, Yes. the incoming ministerial under new seeing pro-business mining pro-business. particular, a things will date administration. we're Economy is optimistic Minister I I of Ebrard. out met Marcelo minister to already know the the the bulk also And industry just that of with We're in point Thanks, the more And as be being new appointments Kevin. the would priority.

things will hopeful we're that So industry. for improve the

with as be Just future is think healthy I like administration for we that, Obviously, new hopeful that case immediate need permits in the the see area but we're to don't the to will that improved coming October. continue the reminder, for it growth and and district. any in, our industry, of we'd operating, a

is pace little My a that second give in drilling that we you your versus the bit Great. up? now of of but can a sense expect you addressed comments exploration your in-drilling this question, and regional near exploration already, can mine us the priorities on targets wrapped maybe

Yes.

at if X we're think rigs. not I surface currently, we're I'm So mistaken,

continuing be we're and -- on reserves. the think Southeast going hopefully ultimately mineralization, I and going will to remain and X. Two reserves deep, and up to of those extend to resources

we additional life have would quarter plan. July release, you intersections have cutoff As hit for our seen the date since new second of our from in mine the some

in we're expand mineralization that extend to to going and continue the So area.

I on So now, to But at other would that continues be have those rigs, And right X we the say least have greenfield. a to plan priority. of one the we X on rig broadly may the putting deeps. We speaking on in that's Obviously, third to the at success. either depends really more central district. look sixth the that quarter. out on or And it

targeting going years since ramp done a we're area, there. of the that up at about mine. fourth also XX afield the reminder, the since area. XX and But area. there's to northwest some northwest than to or days. kilometers of as out drills mapping really to haven't that around so we we just quarter, don't early want And drilling I think turning the we're as exciting for in we which in the But definitely more property -- get doing the looking Lince up that it's And the into further the is

come back And more we're every geologists more forward day Our and field area. up yes, excited getting to there. looking the about drills the from that

That's for me. Great. one helpful. Final

expect mining Just a that timing quick HX here? on wrap then rates us to bump that? the should rebuild Can up we on the you to about second half? And program. still on to one helping Is track in remind it the up see in

refreshing and but bolters, used equipment would increases out loaders, trucks, the We've it We've our we've first Obviously, Yes. entire started underground and really We that first that foremost, program mining our last while the these our jumbos. rebuild equipment of accomplish been our are this We Kevin. on our was include the our year, to been that some rebuild. fleet, we've equipment help offset continuing part -- priority rebuild equipment XXXX. into to able rental thanks, the for had up started our follow-up, and continues program for again, seen. our year. We we've

should But a of is bulk year year has that next the through. finished XX% to the first. the first be about We and the or by than quarter probably of to way priority equipment the probably program go of less XX% obviously

of done answer medium-term our increasing up target. to That to majority is that. the us. said per tonnes we've That's only the So helps we vast day, not X,XXX which

program, We're making using good everything but our long-haul progress stopes. it's towards and that, like all times, optimize our that of shift it's backfill change equipment efficiencies, to continuing blasting cycling

things well. going is that of to drive having these of definitely per types us help refreshed that X,XXX a mark, as All to help day but fleet equipment tonne

and on I'll Congrats the strong me. back queue. the for jump Thanks. quarter, it That's in

Instructions] [Operator

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

forward listening, updating We everyone. Thank you third in for Thanks Okay. you. on progress quarter. the to look our

call. today's concludes This

may You disconnect. now